World Gold Council In-depth Analysis: The Gold Market Will Ultimately Return from High Volatility to Calm

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　　Juan Carlos Artigas, CEO of the Americas and Global Head of Research at the World Gold Council, Taylor Burnette, Research Director for the Americas, and Ray Jia, Head of Research for Asia Pacific (excluding India) and Deputy Director of Industry Development for China, jointly published an article on Thursday for an in-depth discussion on whether there has been a structural shift in the performance of gold. The full analysis is as follows.

　　Gold price Volatility Rises and Key Driving Factors Behind It

　　

Driving factors behind such dramatic fluctuations in gold prices were analyzed in the World Gold Council’s “Gold Market Commentary” for January, February, and March, and specifically include:

• Cooling expectations for a Federal Reserve rate cut, and multiple factors driving an uptick in bond yields—including the late January announcement of Kevin Warsh’s nomination as Federal Reserve Chair, and a surge in inflation concerns triggered by Middle East tensions in late February;
• A stronger US dollar, reversing the previous three-month downtrend;
• After the latest surge in gold prices, investors closed long positions in gold futures, options, and gold ETFs—previously, gold prices shot up rapidly from $5,000/oz to $5,500/oz in just three days, resulting in crowded, overbought long positions and subsequent overselling;
• When gold prices broke below key levels, stop-loss orders were triggered, amplifying price swings.

　　Despite several rebounds in the gold price, ongoing geopolitical risks and increased liquidity demand during market stress have had an additional impact on gold’s volatility, especially as Middle East conflict has affected crucial trading and demand hubs such as Dubai.

　　It is noteworthy that,

(Figure 2). In March, volatility for equities and bonds also rose sharply—something that has happened historically. For example, during the Global Financial Crisis (GFC), investors sold gold to meet margin calls or liquidity needs because of its strong liquidity and past robust performance. Similar moves took place during the initial shock of Covid-19 to global financial markets. In most of the above cases, gold ultimately performed well overall, helping investors to build an “emergency source of funds.” And . This is one of the key advantages shaping gold’s strategic role in investment portfolios: serving as a source of liquidity during market distress.

　　Will high gold volatility subside?

　　Analysis shows that,

(Figure 3). As shown in Figure 1, for most of the time, gold’s annualized volatility stayed between 10% and 18%. Historical data shows that the “half-life” of gold price volatility (the time it takes for the impact of a volatility shock to halve) is about 1.6 months, similar to equities. This means that while gold volatility may spike to multi-year highs, it historically tends to revert to its long-term mean.

　　Has selling pressure affected liquidity in the gold market?

　　

(Figure 4). During the correction in the last week of January, average daily trading volume in the global gold market reached $965 billion (5,805 tons/day), a record high. Over-the-counter (OTC) activity, mainly driven by LBMA members, saw average daily turnover of $395 billion/day, up 41% from the previous week. Major exchanges saw gold derivatives trading rise 45% to $520 billion/day, led by COMEX and SHFE; trading volume in gold ETFs soared 137% from the previous week, reaching $49 billion/day.

　　A similar pattern emerged in March. As gold prices retreated, average daily gold trading volume climbed to $525 billion, up 11% month-on-month and 46% above the 2025 average of $361 billion/day, with LBMA OTC and COMEX activities particularly strong. This mirrored the behavior seen in March 2020, when Covid-19 hammered markets and triggered broad sell-offs, with global gold trading volumes soaring and further reinforcing gold’s role as a source of deep liquidity in periods of widespread financial stress.

　　Meanwhile,

In recent months, gold has experienced several one-off shocks, but a distinct feature is that spreads have widened only for very short durations (Figure 5). Notably, the four largest spread spikes all occurred from Sunday evening to Monday morning, and from Thursday late at night to Friday, during which time prices gapped up or down at the typically less liquid Asian open, but quickly normalized afterward.

　　By examining bid-ask spreads relative to realized volatility, another metric of gold market liquidity emerges.

After adjusting for volatility, spreads overall remain within historical ranges and have retreated from prior highs (Figure 6). This indicates that the widening of spreads is more cyclical than structural, and is expected to normalize further as volatility subsides.

　　Does gold remain a strategic asset in investment portfolios?

　　Despite the recent volatility surge,

. Inflation shocks tend to negatively impact both equities and bonds, turning their correlation positive. Recent oil price spikes associated with Iran tensions could add to inflation-led market volatility. Meanwhile, gold maintains a low to negative correlation with risk assets, thus providing investors with a haven option (Figure 7).

　　Therefore,

This is confirmed by analysis of a hypothetical global equity-bond portfolio (traditional 60/40 allocation, Figure 8). In addition, gold typically pulls back first during the early stages of a risk event, acting as a liquidity source; but if uncertainty lasts longer, gold tends to recover and outperform other asset classes. Therefore,

Editor: Zhu Henan