Record Highs Above $5,600 Followed by Sharp Correction Amid Volatility

Gold prices have experienced extreme volatility in the opening weeks of 2026, surging to an all-time high near $5,600 per ounce in late January before suffering one of the most dramatic sell-offs in decades, dropping as much as 21% in a single session on February 2. The precious metal has since staged a partial recovery, trading around $4,887 per ounce as of February 5, 2026, reflecting a turbulent start to the year driven by shifting interest-rate expectations, geopolitical uncertainty and massive speculative positioning.

The rally that carried gold to $5,608.35 on January 29 marked the culmination of a historic bull run that saw the metal gain more than 65% in 2025 and continue climbing into the new year. Analysts attributed the surge to sustained central-bank buying, persistent inflation concerns, rising U.S. debt levels, de-dollarisation efforts by emerging markets and investor hedging against potential policy surprises under the second Trump administration.

However, the momentum reversed sharply. Spot gold plunged nearly 9% in a single day on January 30 — its largest daily percentage drop since the 1980s — after reports surfaced regarding President Trump’s nomination of Kevin Warsh to chair the Federal Reserve. Markets interpreted Warsh as likely to pursue a less dovish monetary policy than anticipated, prompting a rush to unwind long positions and triggering stop-loss orders across leveraged funds and retail traders.

Silver suffered even more acutely, collapsing nearly 28–30% in the same session — its worst one-day performance since 1980 — as the gold-silver ratio widened dramatically before compressing again in the rebound.

By February 5, spot gold had recovered to approximately $4,887 per ounce, down 1.57% on the day but still up 8.70% over the past month and a staggering 71.01% year-over-year. Gold futures for February 2026 delivery traded around $4,988, reflecting ongoing choppiness.

Drivers Behind the Volatility

Several overlapping factors fueled the whipsaw action:

1. Monetary Policy Uncertainty Expectations for Federal Reserve rate cuts in 2026 have fluctuated wildly. Early-year optimism about aggressive easing gave way to caution after signals from the Trump administration and nominee commentary suggested a more hawkish tilt. Lower short-term rates historically support gold by reducing the opportunity cost of holding non-yielding assets; any delay or reversal in cuts sparked selling.
2. Central Bank & ETF Demand Central banks continued aggressive accumulation — a trend that began in earnest in 2022 — providing a solid floor. However, retail and speculative ETF inflows reversed sharply during the late-January sell-off, amplifying downside momentum before bargain hunters stepped in.
3. Geopolitical & Macro Risks Ongoing global tensions, U.S. fiscal deficits, trade policy uncertainty and de-dollarisation efforts by BRICS nations kept a bid under gold. Yet the speed of the rally led to overbought conditions, setting the stage for profit-taking.
4. Technical & Positioning Extremes Futures positioning reached record net-long levels in late January. The subsequent liquidation triggered cascading stops, creating a self-reinforcing drop that erased weeks of gains in hours.

Analyst Forecasts & Outlook for 2026

Despite the correction, most major banks and research houses remain bullish on gold for the full year:

• Wells Fargo Investment Institute raised its end-2026 target to $6,100–$6,300 per ounce, citing expectations of lower short-term rates and sustained central-bank demand.
• J.P. Morgan maintained a $6,300 year-end forecast, arguing that hedges against macro and policy risks have become “sticky.”
• Goldman Sachs targets $5,400 by year-end, driven by central-bank accumulation and renewed ETF inflows as rates fall.
• Bank of America sees potential for $6,000 in the coming months, noting that physical-market fundamentals remain supportive despite volatility.

Reuters’ latest poll of 30 analysts and traders (conducted late January–early February 2026) returned a median forecast of $4,746.50 per ounce for the full year — the highest annual projection in Reuters polls dating back to 2012 and up sharply from $4,275 in the October survey.

Silver forecasts were similarly upgraded, with analysts now expecting an average of $79.50 per ounce in 2026 (up from $50 in the prior poll).

Market Implications & Investor Considerations

The volatility has created both opportunities and risks:

• Dip-buyers stepped in aggressively after the February 2 low near $4,400, pushing prices back toward $5,000 in subsequent sessions.
• Physical premiums on coins and bars showed resilience, indicating robust retail demand even during the correction.
• Gold/silver ratio compressed from extreme levels, suggesting silver may outperform on any sustained rebound.

For investors, the swings underscore gold’s dual role as a safe-haven asset and a speculative vehicle. While fundamentals — central-bank buying, geopolitical risk, fiscal concerns — remain supportive, near-term price action will likely hinge on U.S. monetary-policy signals, dollar strength and positioning unwinds.

As of February 5, 2026, gold’s path forward remains upward-sloping according to most forecasts, but the journey is proving far bumpier than many anticipated after the smooth ascent of 2025.