SINGAPORE – Gold’s sharp price swings this year may have unsettled investors, but the precious metal still has a place in investors’ portfolios.
While gold has become significantly more volatile in 2026, its core role as a hedge against risk remains intact, an April 17 report by the World Gold Council (WGC) found.
The WGC is the international trade association and market development organisation for the gold industry.
Gold, which ended 2025 just above US$4,500 an ounce before surging to an all-time high above US$5,600 in January, was trading above US$4,800 on April 17.
A stronger US dollar has made gold more expensive for buyers using other currencies, dampening demand.
At the same time, several factors have driven the volatility. Expectations that US interest rates would be cut have cooled, pushing bond yields higher and weighing on gold, which typically performs better in a low-rate environment.
After a rapid surge in January that saw gold jump from US$5,000 to US$5,500 an ounce in just three days, some investors had also moved to lock in profits, triggering a wave of selling.
This was compounded by automated trading triggers, where preset sell orders were activated as prices fell past certain levels, accelerating the decline.
Geopolitical tensions, including the ongoing conflict in the Middle East, have also added to uncertainty, fuelling both buying and selling as investors react to shifting risks.
But volatility in gold prices during periods of market stress is not unprecedented, with similar spikes and troughs seen during the global financial crisis and Covid-19 pandemic, WGC said.
It also noted that gold continues to move in ways that make it useful in a diversified portfolio.
For one, its price tends to move differently from stocks and bonds, particularly during times of market uncertainty, which helps investors diversify risk and minimise overall portfolio losses.
Recently, for example, as inflation concerns resurfaced on the back of higher oil prices, gold’s low correlation with other assets made it a valuable hedge for investors despite it also being more volatile than normal.
Gold is also very liquid, meaning it is easy to sell without this affecting its price too much. In the last week of January, average daily trading volumes hit a record US$965 billion – or 5,805 tonnes – across major markets, indicating that demand for the precious metal remained robust even as more decided to offload their holdings.
This is important because gold is one of the few assets investors can easily sell during periods of market stress to raise cash.
Additionally, once the initial rush for cash has passed, gold typically recovers to deliver solid returns over the long term.
Gold has been hit by several episodic shocks in recent months, but the key is how short-lived the resulting price disruptions have been, the report said.
While gold can experience sharp and sudden price moves, these are usually temporary rather than a lasting shift, WGC data showed.
