What's happening to the price of gold worldwide?

In recent months, world gold prices have fluctuated more like a "roller coaster" than a stable, anchored ship.

Gold bars are stacked at the Pro Aurum gold trading company in Munich, Germany, on January 10, 2025 - Photo: REUTERS

From nearly reaching $5,600 per ounce, prices have now slipped below $4,500 per ounce.

Gold has long been known as a financial "safe haven" during times of volatility. But in recent months, amid geopolitical instability and market panic, the precious metal has been fluctuating more like a roller coaster than a stable anchored vessel.

In late January, world gold prices surged to an all-time high of nearly $5,600 per ounce – almost double what they were a year earlier. Since then, gold prices have fallen by about 20%, plummeting sharply as conflict erupted in the Middle East.

According to Reuters, on March 26, the price of gold fell 1.2% to $4,451.47 per ounce.

But it's also worth noting that gold is still at a high price, having risen nearly 300% over the past decade. Much of this increase has been driven by the process of "financialization".

On The Conversation website on March 26th, Rand Low, associate professor of quantitative finance at Bond University (Australia), pointed out that the sharp fluctuations in gold prices this year will shatter any remaining illusions that gold has always been a safe haven.

To understand why, we need to look at how modern financial markets operate, especially how the oil shock differs from other crises.

The umbrella and the storm shelter

To protect their assets, investors often turn to assets known as "hedges" or "safe havens".

Hedging instruments are investments that typically move in the opposite direction to the rest of the market in the long term. Think of it like always holding an umbrella : When it rains, the person with the umbrella stays drier than others, but when it's sunny, they miss out on some of the sunlight (i.e., profit opportunities).

Conversely, a safe haven asset is one that moves against the rest of the market during periods of extreme stress or unexpected crises. It's like a storm shelter that people only take refuge in when a major storm hits.

In a 2016 study, Associate Professor Rand Low and colleagues found that gold has several safe-haven characteristics, particularly in relation to the stock markets in Australia, the US, Germany, and France.

During the 2008 global financial crisis, gold was the most stable commodity among the precious metals studied by Associate Professor Rand Low and his colleagues. While the price of gold did fall, it avoided the catastrophic decline seen in other precious metals.

Gold also demonstrated safe-haven characteristics in 2011, when credit rating agency Standard & Poor's (S&P) downgraded the US's AAA credit rating to AA+ for the first time in history, causing many global stock markets to plummet.

The key point is that these shocks originate from the financial system itself, such as banking system failures and credit rating downgrades.

However, the world is now facing something entirely different: a major energy shock due to disrupted oil supplies and severe damage to oil and gas facilities in the Middle East.

World gold prices have now slipped below the $4,500/ounce mark, after having risen to nearly $5,600/ounce - Photo: THE CONVERSATION

The oil shock and the reasons for the recent drop in gold prices.

According to financial theory, when war breaks out, with inflation rising or the stock market crashing, investors often perform what is called "quality shift"—withdrawing from risky assets and moving to what are considered safer places like gold.

In a 2025 study, Associate Professor Rand Low and his team of authors offer a deeper insight. This research uses data from recent periods of volatility, such as the COVID-19 pandemic, when gold's safe-haven role appeared less pronounced.

The authors found that gold remains a popular choice as investors withdraw from riskier investments. But gold is not an impenetrable "safe haven."

"Instead of being completely detached from the panic during a crisis, gold absorbs some of the volatility from both the stock market and the energy market, which could cause gold prices to fall," Associate Professor Rand Low noted.

Firstly, when the market is volatile, some large investors may be forced to sell gold to cover other losses or meet financial obligations, such as margin calls.

Secondly, for other large investors, the recent price surge presents an opportunity to sell gold at high prices to lock in profits or rebalance their portfolios.

Furthermore, gold does not possess the same high intrinsic value as oil. Compared to other commodities, the industrial demand for gold is not significant. In a severe crisis, if faced with a choice between oil and gold, what does global industry truly need? The answer is: oil.

Another important factor is how people invest in gold. Over the decades, gold has become increasingly "financialized".

Nowadays, gold can be easily bought and sold "on paper" through complex financial instruments such as derivatives, or through gold exchange-traded funds (ETFs). With these funds, people don't actually buy gold, but rather an asset whose price is designed to reflect the price of gold.

Today, the surge in speculation means that commodity prices are no longer solely dependent on actual supply and demand. Because global investors now hold both traditional equities and gold derivatives simultaneously, the risk of being affected by general market shocks has increased significantly.

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Source: https://tuoitre.vn/chuyen-gi-dang-xay-ra-voi-gia-vang-the-gioi-20260326160717002.htm