Has gold's performance structurally changed?

• Cooling Fed rate cut expectations and upticks in bond yields sparked by various triggers such as the announcement of Kevin Warsh as Fed Chair nominee in late January and the Middle East conflict that pushed up inflationary concerns in late February
• A strengthening of the USD, reversing a three-month declining trend
• Investor unwinding of long positions in futures, options and gold ETFs following the final exponential surge in gold’s rally, which took it from US$5,000/oz to US$5,500/oz in just three days
• Stop-loss orders, which amplified gold’s moves when it breached down through key thresholds.

It is important to note that gold is not the only asset whose volatility has increased in 2026 (Chart 2). Volatilities of equities and bonds have increased sizably in March. 

And such episodes have happened before. For instance, during the Global Financial Crisis (GFC), investors sold gold, given its ample liquidity conditions and prior robust performance, to meet other margin calls or liquidity needs. Similar actions were seen when the COVID-19 pandemic took its toll on global financial markets. In most of these incidents, gold has done well and helped investors accumulate “emergency funding sources”. And gold also delivered robust returns when liquidity crunches were over. This is one of the key edges shaping gold’s strategic status in investors’ portfolios: the liquidity source during market stress.

Our analysis shows that gold’s volatility is mean reverting (Chart 3,p3). As shown in Chart 1 (p1), gold’s annualised volatility has generally remained between 10% and 18% during most days. Furthermore, historical data suggests a volatility ‘half-life’ (the time it takes for a volatility shock event’s impact to halve) of around 1.6 months, similar to that of equities. The implication is clear: while gold volatility can surge to levels unseen for years, it has historically reverted towards its long‑run norm.

Was gold market liquidity impacted by sell-offs?

A similar pattern emerged in March. As gold prices corrected, average daily trading volumes rose to US$525bn/day, up 11% m/m and 46% above the 2025 average of US$361bn/day, with LBMA OTC and COMEX activity particularly strong. This mirrored activity seen in March 2020 when the COVID‑19 pandemic hit global markets and triggered selloffs, global gold trading volumes spiked, reinforcing gold’s role in providing deep liquidity during periods of broad financial stress.

We also examined an alternative measure of liquidity by looking at bid-ask spreads relative to realised volatility. Although spot gold saw wider spreads during episodes of market stress over the past two years, this appears to have been driven largely by higher volatility rather than a sustained deterioration in liquidity. On a volatility-adjusted basis, spreads have remained broadly within their historical range and have already eased from prior peaks (Chart 6). This suggests that the widening in spreads was episodic rather than structural and should continue to normalise as volatility recedes.

Despite recent volatility spikes, gold remains a strategic asset in investors’ portfolios. Inflation shocks typically lead to positive bond-equity correlations due to their adverse effects on both asset classes. And the recent spike in oil prices linked to the Iran conflict will likely reinforce inflation-related volatility. Meanwhile, gold maintains its low-negative correlation with risk assets, offering investors a safe-haven (Chart 7).