Will gold prices fall in 2026? Gold market outlook analysis and risk warning

In the past two years, gold prices have remained strong, and some investors are beginning to worry: Will gold prices fall? This is not just unnecessary fear. With gold reaching new highs and gains exceeding 150%, understanding risks and opportunities is equally important. The key to whether gold will decline depends on whether there are substantial changes in the structural factors supporting this bull market.

Over 150% Increase in Five Years — Where Does the Bullish Momentum Come From?

According to data from Reuters and Bloomberg, gold prices are expected to rise over 30% in 2024-2025, hitting a 30-year high. This bull run started in early 2024 at around $2,000 per ounce and surged past $5,150 per ounce by early 2026, with cumulative gains exceeding 150%.

What’s more remarkable is gold’s incredible resilience — it has repeatedly hit new all-time highs and has shown little correction even during periods of Fed policy adjustments. In mid to late February, spot gold (XAU/USD) remained stable above $5,150–$5,200.

This strong performance is driven not just by short-term events but by five major structural factors reinforcing each other:

1. Ongoing Trade Protectionism Disruptions

Uncertainty around US tariffs continues to boost market risk aversion. Historical experience shows that past trade war cycles (like the US-China trade war in 2018) caused short-term gold price increases of 5-10%. In 2026, regional trade frictions are still simmering, remaining a key variable supporting gold prices.

2. Structural Decline in US Dollar Confidence

US fiscal deficits, frequent debt ceiling debates, and the global de-dollarization trend are shifting capital from dollar assets to hard assets like gold. This is not a short-term phenomenon but a long-term structural change. As the appeal of dollar-denominated assets wanes, gold benefits.

3. Expectations of Federal Reserve Rate Cuts

Fed rate cuts weaken the dollar and reduce the opportunity cost of holding gold. In 2026, further rate cuts are expected—1 to 2 times—providing strong support for gold. Historically, each rate-cut cycle has led to significant gold price increases (e.g., 2008–2011, 2020–2022). Investors can monitor rate cut probabilities in real-time via CME FedWatch — rising probabilities favor gold; declining probabilities may lead to corrections.

4. Long-term Geopolitical Risks

The ongoing Russia-Ukraine conflict, escalating Middle East tensions, and regional instability keep safe-haven demand high. In a fragile global supply chain environment, geopolitical events can cause sharp spikes in gold prices.

5. Continuous Central Bank Gold Purchases

According to the World Gold Council (WGC), central banks net purchased over 1,200 tons of gold in 2025, marking the fourth consecutive year of net purchases exceeding 1,000 tons. WGC surveys show that 76% of respondent central banks expect their gold holdings to increase “moderately or significantly” over the next five years, while most anticipate a decline in dollar reserves. This indicates a long-term structural increase in global demand for gold as a reserve asset.

Will Gold Prices Fall? Three Major Risks and Five Supporting Forces

Why is it that “short-term fluctuations, long-term unlikely to decline” for gold?

Understanding this requires examining two dimensions:

Potential Risks:

First, gold prices are not on a straight upward trajectory. If real interest rates rebound, geopolitical risks ease, or the dollar suddenly appreciates, gold could face corrections. The Fed’s policy adjustments in 2025 caused volatility of 10-15%. However, such short-term corrections usually do not alter the long-term trend.

Second, global debt levels (reaching $307 trillion by 2025) limit policy space. High debt environments restrict aggressive rate hikes, constraining real interest rate increases. In other words, gold’s “bear market” declines are limited.

Additionally, stock markets are at historic highs with few leading stocks. While not implying an imminent crash, disappointing economic data could trigger disproportionate consequences, making gold’s defensive role more valuable.

Five Long-term Supportive Factors:

1. Sticky Inflation amid Slowing Global Economy — The economy lacks momentum, but inflation remains persistent, creating stagflation with “low growth, high inflation,” making gold a traditional hedge against inflation.

2. Institutionalized Central Bank Gold Buying — Since the 2022 outbreak, central bank gold accumulation has become routine, not a fleeting phenomenon.

3. Long-term Skepticism of the US Dollar System — Central bank gold purchases reflect doubts about the dollar’s reserve status, a concern unlikely to vanish with a few economic data points.

4. Normalization of Geopolitical Risks — Ongoing conflicts like Russia-Ukraine and Middle East tensions lack clear resolution, sustaining safe-haven demand.

5. Increased Participation in Trading Markets — More investors are engaging via flexible trading instruments like XAU/USD, boosting liquidity and enabling rapid price responses.

Conclusion: Will Gold Prices Fall? Short-term volatility is inevitable, but a long-term downtrend is unlikely unless these structural factors undergo fundamental reversal.

Central Bank Gold Accumulation and Long-term Skepticism of the Dollar System

Central bank actions often lead market trends by 5–10 years. When global central banks collectively increase gold holdings, it signals deep institutional concern about future financial structures.

WGC and LBMA data show that current central bank gold reserves account for about 34% of total official gold reserves, and this ratio is still rising. Central banks are not blindly following trends—they are pricing in long-term risks.

The rising floor of gold prices indicates that even in bear markets, central banks and long-term investors continue to accumulate, providing effective price support.

Why Do Institutions Remain Bullish on Gold in 2026?

By mid to late February, spot gold has repeatedly hit new highs this month. So far, after a 60%+ increase in 2025, gold has risen another 18–20% in 2026, with no signs of slowing.

Major financial institutions’ consensus forecasts:

• 2026 average price: $5,200–$5,600 per ounce
• Year-end target: typically $5,400–$5,800, with optimistic scenarios reaching $6,000–$6,500

Specific forecasts (as of late February):

• Goldman Sachs: Year-end target $5,700 (raised from $5,400), citing ongoing central bank buying and declining real yields
• JPMorgan: Q4 target $5,550, driven by ETF inflows and safe-haven demand
• Citi: Average $5,800 in H2, with risks of rising to $6,200 amid recession or high inflation
• UBS: Conservative year-end $5,300, but potential for breakout if rate cuts accelerate
• WGC/LBMA: Average annual forecast around $5,450

Commonality: most forecasts are optimistic, with limited downside scenarios, reflecting market confidence in underlying support factors.

How Should Different Investors Respond to Gold Price Fluctuations?

Experienced short-term traders:

Gold’s annual volatility averages 19.4% (vs. 14.7% for S&P 500), offering ample trading opportunities. Liquidity is high, and short-term trends are easier to analyze. During sharp rises or falls, momentum is clear. Monitoring economic calendars and CME FedWatch helps capture short-term gains.

However, beginners should be cautious: start with small positions, avoid overleveraging. Emotional reactions can lead to losses.

Long-term physical gold holders:

If the goal is wealth preservation, be prepared for significant medium-term swings. While the long-term trend is upward, 10-year cycles can see doubling or halving. Transaction costs for physical gold (5–20%) also impact net returns.

Portfolio allocators:

Including gold in a diversified portfolio is feasible, but don’t allocate all assets to it. Gold’s volatility is comparable to stocks. A balanced approach suggests 5–15% of the portfolio, adjusted for risk appetite.

Maximizing returns:

A dual strategy of “long-term holding + short-term trading” can be effective. Under bullish fundamentals, exploiting market volatility around US trading hours can enhance returns without sacrificing long-term gains. Requires experience and risk management.

Will Gold Prices Fall? Final Tips

Gold’s volatility exceeds that of stocks, with an average annual amplitude of 19.4%, highlighting the opportunity and risk. The key is whether you passively endure or actively leverage these fluctuations.

The long-term cycle of gold is very extended. Over a 10+ year horizon, the probability of wealth preservation and appreciation is high. But within that period, significant corrections may occur, testing investors’ patience and decision-making.

The straightforward answer to “Will gold fall?” is: short-term fluctuations are inevitable, with 10–15% corrections possible mid-term, but unless the structural factors fundamentally reverse, a sustained long-term downtrend is unlikely. Concerns about the dollar system, ongoing central bank buying, and high global debt won’t disappear with a few policy tweaks.

Instead of passively fearing declines, it’s better to proactively monitor key drivers: economic calendars, CME FedWatch, central bank policies, geopolitical developments. Following news often leads to fear at market bottoms and greed at peaks. Systematic decision-making helps seize opportunities amid volatility.