After a series of "dizzying" increases, world gold prices at times fluctuated in the range of 5,500-5,600 USD/ounce, far exceeding most of the previous forecasts of analysts and international banks. However, immediately after hitting a peak, the market quickly witnessed strong temperature drops, reflecting the reversal of cash flow and increased cautious sentiment. This development raises the question of why gold prices could increase so quickly, and why they suddenly adjusted in just a short time?
Gold prices soar, breaking all previous forecasts
Before entering the current rally, most international financial institutions only set gold prices around 4,800-5,000 USD/ounce for 2026. The fact that this precious metal has risen vertically to nearly 5,600 USD/ounce in a short time has made many traditional valuation models obsolete, even ineffective in forecasting short-term trends.
The reason does not come from a single shock, but from the rare convergence of many macroeconomic risks at the same time. The global market is facing increased public debt, widespread geopolitical instability, strong fluctuations in the bond market and growing questions about the effectiveness of monetary policy. In that context, gold not only plays the role of a safe-haven asset, but also becomes a measure of market confidence in the current financial order.
Currency devaluation trading" returns
One of the core drivers of the price increase is "debasement trade" - defensive trading against the risk of currency dilution. As governments are forced to expand fiscal spending, while monetary policy room is shrinking, investors are concerned that the real value of legal currencies will be eroded over time.
Notably, the recent sell-off in the Japanese bond market has raised concerns that even the most stable markets are no longer immune to public debt risks. This development has prompted cash flow to turn to finite assets such as gold, thereby pushing precious metal prices to soar beyond all previous forecast scenarios.
Policy expectations and the role of the Fed
Although the US Federal Reserve (Fed) has maintained interest rates unchanged in recent meetings, the market is not only looking at the present. Investors bet on the possibility that the Fed will be forced to switch to a softer stance in the near future, as economic growth slows down and financial risks continue to accumulate.
More importantly, debates surrounding the Fed's independence and increasingly apparent political pressure have weakened confidence in the ability to control the economic cycle with traditional policy tools. When confidence falters, gold - an asset that does not depend on any central bank - becomes the default option for defensive cash flow.
Profit-taking pressure and reduced liquidity pull gold prices down
However, when prices increase too quickly, the market begins to adjust itself. Technical indicators show that gold falls into a state of over-buying, forcing many short-term investors to take profits to preserve profits. At the same time, liquidity in the precious metal market is narrowed as major banks and financial institutions limit expanding positions to control balance sheet risks.
The fact that exchanges raised margins for precious metal contracts also contributed to "blocking" speculative cash flow. As a result, in just a few sessions, gold prices from a state of excitement quickly turned to adjust, exposing the downside of a parabolic increase.
However, many experts believe that the current cooling down does not mean that the upward trend has ended. Foundation factors such as high public debt, complex geopolitics, central banks continuing to buy gold and fragmentation of the global financial system are still present.
The problem lies in the fact that gold is entering a larger and more unpredictable volatility phase, where the boundary between opportunity and risk becomes fragile. For long-term investors, corrections can open up accumulation opportunities. Conversely, for short-term cash flow, this is a market that requires high discipline, tight risk management and avoids the mentality of "picking".
The fact that gold prices exceeded forecasts and then quickly cooled down is not a paradox, but an inevitable consequence of a market reflecting structural instability. When confidence in currency and policy is challenged, gold will continue to be mentioned a lot. But along with that attraction are strong fluctuations, reminding that in the gold craze, not everyone is the winner.
