A Reading of Fluctuations in Gold Prices
This is not the first time that gold prices have experienced sharp rises, yet it is the first time the yellow metal has recorded unprecedented highs, and at a breathtakingly accelerating pace. The price of gold rose by 10.18% over the past month, after rising by 73.59% during 2025, including 45.07% in the last six months. Notably, the rate of increase in January 2026 would have been even higher were it not for the drop that gold prices witnessed in its final days.
Just as this recent surge seemed surprising in its speed and intensity, the subsequent decline appeared expected, even if its timing was not, particularly amid the chaos that gripped gold markets and the hysteria of demand for the yellow metal and other precious metals. Despite the pullback in prices at the close of last week's trading, gold is still trading at unprecedented levels, while global central banks continue to buy it at a steady, unabated pace.
Historically, the first major jumps in gold prices were recorded in 1973, following the October War between the Arabs and Israel and the accompanying embargo on oil supplies to Western countries. The price per ounce reached around $123.5, plunging the global economy into a phase of "stagflation", which prompted investors to treat gold as a store of value rather than merely a monetary alternative to the US dollar, as the fragility of paper currencies was exposed.
The second jump in gold prices took place in January 1980, when the price of an ounce of gold reached $668, up from $243.66 in November 1978. This came against the backdrop of a series of major geopolitical shocks, including the Islamic Revolution in Iran, the American hostage crisis, and the Soviet invasion of Afghanistan.
These developments witnessed by the world between 1978 and 1980 led to surging demand for gold and pushed its prices to what was then a historic peak, before the Federal Reserve put an end to this rally by raising interest rates to unprecedented levels, leading to relative stability in gold prices for nearly two decades.
In 2008, gold prices once again experienced sharp volatility. After touching $1,000 an ounce in March, the price retreated to around $728 in September of the same year, in the wake of the subprime mortgage crisis that caused the collapse of major banks, foremost among them Lehman Brothers, culminating in the global financial crisis between 2008 and 2011.
While fluctuations in gold prices persisted, the overall price trend remained upward, reaching $1,826 an ounce in August 2012, before gold suffered its largest annual loss of around 28% in April 2013. In December, the price per ounce then reached around $1,200, bringing a five-year upward cycle to an end.
It is worth noting that gold prices fell at the onset of the subprime mortgage crisis rather than rising. The reason lies in the fact that investors often rush to liquidate whatever can be liquidated, particularly gold, to cover emerging losses and meet margin requirements. This reveals a fundamental truth: gold is sold first when the need for liquidity becomes an absolute priority.
This pattern was repeated during the waves of sharp declines in technology stock and cryptocurrency markets in early 2026, when some investors were forced into liquidations of their profitable positions in gold (meaning sell-offs) to cover their losses in other assets. This reaffirmed that gold, even if it is the ultimate safe haven, is often used as a source of liquidity in times of crisis.
However, the volatility seen in gold prices since the beginning of this week reflects an interplay of many factors. On the one hand, fears of the Federal Reserve losing its independence, declining confidence in the US currency, rising inflation rates, and escalating geopolitical tensions, alongside continued gold purchases by central banks, have helped support prices.
On the other hand, the use of gold as a speculative instrument, and the risks this poses to the stability of gold prices, has heightened volatility, particularly through leverage, futures contracts, contracts for difference (CFDs), and exchange-traded funds (ETFs), all of which are paper contracts, instruments that make the volume of traded "paper gold" many times greater than the volume of physical gold actually available.
Since speculators aim to make quick profits, they resort to selling at the first sign of weakness, triggering cascading waves of selling that amplify declines. In this case, a drop in the price of gold does not reflect a change in gold's intrinsic value, but rather what is known as "herd behaviour" in financial markets. Such declines are often short-term and unrelated to structural factors concerning the precious metal itself.
A review of price fluctuations since the decoupling of gold from the US dollar confirms that these fluctuations are the result of interaction among monetary, geopolitical, and behavioural factors. Although gold is distinguished as a long-term store of value, it remains susceptible to short-term volatility, especially when it turns into an instrument for speculation.
Yet the paradox lies in the fact that waves of decline are often followed by a return to long-term strategic buying, particularly from central banks and hedging investors, reaffirming that price volatility does not negate gold's standing, but rather reinforces its role as a strategic asset in a time dominated by uncertainty.
Translated from Arabic with AI. Read it in Arabic