The global gold market witnessed one of the most volatile periods in its history during the first half of 2026, after the precious metal reached unprecedented record highs in January before entering a sharp correction that wiped out nearly all of its year-to-date gains by the end of June, amid rapid shifts in the global economic landscape, sharp swings in investor risk appetite, and persistent geopolitical tensions.
Despite falling by around 7% since the start of the year, gold remains one of the best-performing assets over the past twelve months, outperforming many other asset classes. According to a recent report by the World Gold Council, this reflects gold’s continued status as one of the most important safe-haven assets during periods of uncertainty.
A Historic Rally Followed by a Sharp Decline
Gold started the year strongly, supported by rising geopolitical risks and increased investor demand for safe-haven assets. It recorded 12 new all-time highs in January, surpassing the $5,500-per-ounce mark in intraday trading, before entering a steep downturn that pushed prices below $4,000 per ounce in late June.
The report notes that these sharp movements pushed realized volatility above 50%, coinciding with the outbreak of the confrontation between the United States and Iran. Volatility later eased to below 30%, but remained well above its historical average of around 17% over the past two decades.
Four Factors Shaped Gold’s Price Action
The report explained that gold’s performance during the first half was not driven by a single factor, but by the interaction of four main drivers: global economic growth, the level of risk and uncertainty, the opportunity cost linked to interest rates and the U.S. dollar, and trading momentum shaped by short-term investor positioning.
The World Gold Council’s return attribution model showed that geopolitical risk and shifting investor sentiment had the greatest impact on price movements, alongside investment momentum driven by position building and profit-taking. Meanwhile, the impact of interest rates and the dollar was mixed, as markets repeatedly repriced expectations for U.S. monetary policy.
Asia Leads Price Support
One of the key findings highlighted by the report was the clear shift in centers of influence within the global gold market, with Asian markets now playing a larger role in shaping price trends.
The report said most of gold’s rallies during the first half occurred during Asian trading sessions, while most declines were concentrated during U.S. trading hours. This reflects the growing weight of Asian investors and consumers in the price discovery process, compared with the traditional role played by Western markets in previous years.
Gold Enters H2 in Balance, but Remains Open to New Breakouts
The World Gold Council believes current prices are broadly aligned with expectations for the global economy, which are based on moderate growth, a gradual decline in inflation while remaining above target levels, and limited additional interest rate increases by major central banks.
Under these conditions, the report expects gold to move sideways during the second half of the year, within a range of roughly 5% higher or lower than current levels, unless new economic or political developments alter the balance of the market.
At the same time, the report stresses that the possibility of a price breakout remains in place. A further slowdown in the global economy, renewed geopolitical escalation, markets beginning to price in an interest rate-cutting cycle, or a strong wave of buying after the recent declines could push gold back toward $4,500 per ounce, and possibly higher if economic signals are strong enough.
Conversely, continued strength in the global economy, higher yields, and stable financial markets could place further pressure on gold. However, the report expects buying on dips to limit any sharp decline exceeding 10% from current levels.
The Fed and the Dollar Remain at the Center of the Outlook
The report confirmed that gold’s outlook in the second half of 2026 will remain closely tied to the path of U.S. monetary policy. However, gold prices will not move according to Federal Reserve decisions alone, but will remain dependent on a mix of economic growth, inflation, yields, the dollar, and geopolitical risk.
According to the report, market expectations point to the possibility that the Federal Reserve, along with a number of other major central banks, may raise interest rates one more time before the end of the year. The global economy is expected to grow by around 2.9% in 2026, while the U.S. economy is forecast to expand by about 2.1%, broadly in line with its average performance over past decades.
At the same time, U.S. inflation is expected to peak near 3.9% in the second quarter before gradually declining, while global inflation is projected to average around 4.3% this year. The outlook for the U.S. dollar remains uncertain, as opposing forces may either support or pressure the currency in the coming months.
Current Prices Reflect the Market’s Base Case
The World Gold Council believes current gold levels are largely consistent with the market’s base-case scenario for the global economy, noting that the precious metal does not derive its value from the U.S. economy alone, but also reflects global economic developments and the behavior of investors and consumers across different markets.
The report indicated that if current economic conditions remain broadly unchanged, gold could trade within a limited range of around 5% higher or lower than the $4,100-per-ounce level during the second half of the year, reflecting a balance between supportive and pressure factors in the market.
Three Drivers Could Restore Gold’s Upside Momentum
Despite expectations for sideways trading, the report argues that gold has strong potential to resume its upward trend if new catalysts emerge. These include a deterioration in global economic conditions or an escalation in geopolitical tensions, a market shift toward expectations of interest rate cuts, and the return of long-term investors after the recent correction.
The valuation model used by the World Gold Council suggests that these factors could drive gold back toward $4,500 per ounce, while stronger catalysts could open the door for a return toward levels close to $5,000 per ounce.
U.S. Elections Add a New Layer of Uncertainty
The report also addressed the U.S. midterm elections scheduled for November, describing them as one of the issues closely watched by investors, amid expectations that Democrats may regain control of the House of Representatives while Republicans retain their majority in the Senate.
It noted that the relationship between U.S. elections and gold prices has not been historically consistent. However, periods of heightened political uncertainty often strengthen demand for gold as a hedging tool, especially if elections result in divided decision-making centers in the United States, raising the risk of delays or gridlock in economic and fiscal policy.
Geopolitics Remains the Strongest Driver
The report stated that ongoing geopolitical instability remains one of the most important factors supporting gold, noting that historical analysis shows every monthly increase of 100 points in the Geopolitical Risk Index has, on average, led to a 2.5% rise in gold prices.
Although gold did not respond in the traditional way to the tensions seen in the Middle East over recent months, the World Gold Council believes that this was an exceptional case caused by several temporary factors, and does not signal a change in the historical relationship between gold and geopolitical crises, which still tend, in most cases, to support the precious metal.
Inflation May Return to Support Gold
The report noted that persistent inflationary pressures remain one of the most important potential sources of strength for gold. While the precious metal may respond with a delay during the early stages of rising inflation, it often outperforms many other assets when inflation becomes prolonged and difficult to control.
It added that lower oil prices no longer necessarily mean lower inflation, as a strong recovery in global demand could keep price pressures elevated, reinforcing gold’s appeal as a hedge against the erosion of currencies’ purchasing power.
What Could Push Gold Lower?
On the other hand, the report warned that gold remains exposed to pressure if the U.S. economy continues to show stronger-than-expected resilience, or if the dollar and yields rise more sharply than anticipated, or if investors maintain a strong appetite for higher-risk assets such as equities.
It also pointed out that part of the current pressure is linked to profit-taking and portfolio rebalancing after gold’s record performance in 2025, in addition to the impact of technical factors, which have become more influential in short-term market movements.
Nevertheless, the World Gold Council believes that any decline of 10% to 15% from current levels would likely trigger a new wave of investment and physical demand, which could limit the chances of a deeper downturn in the coming period.
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