Editor’s Note
This article discusses the recent volatility in gold prices, exploring whether the current rally presents a buying opportunity or a potential risk following a historic sell-off.
Gold prices have surged sharply following the heaviest sell-off in decades. Spot prices climbed above $5,000 per ounce, with spot gold trading around $5,090 in the recent rally.
This rally occurred after a sharp decline from record highs above $5,500, prompting many short-term traders to begin exiting their positions.
If you believe the sell-off was excessive, this rally may seem like a relief. However, it can also be dangerous because the first rally after a forced sell-off often appears “clear” just before volatility returns.
Many traders are now asking a straightforward question: Is it wise to buy gold after the price surge, or are late buyers getting trapped at a loss? There is no single definitive answer. It depends on your time horizon, risk tolerance, and the factors influencing gold prices in 2026.
The rally in gold prices following forced selling, margin pressure, and rapidly shifting interest rate expectations appears genuine. These factors caused significant and rapid fluctuations in gold prices in both directions.
1. Selling in gold was exacerbated by changes in leverage and margin, often leading to excessive price spikes that later normalize.
2. Real yields remain positive, which could limit gold’s upside potential.
3. Long-term demand factors remain strong, particularly investment flows and central bank buying trends.
4. Market volatility is high, so timing and position sizing matter more than usual.
The recent rally has a straightforward story centered on positioning and the dollar.
Gold prices plummeted due to market reaction to fears of a more aggressive shift in the Fed’s outlook after President Trump nominated Kevin Warsh as the next Fed Chair, strengthening the dollar and triggering technical selling.
The market rallied after the dollar’s strength paused, buying emerged on dips, and pressure from leveraged selling eased.
Margin-related mechanics were also part of the flush, amplifying moves in both directions in a crowded position.
This is where most traders get stuck. During a rally, it feels like you must buy immediately or miss the opportunity. But this thinking is usually wrong.
A better approach is to decide what “type” of buyer you are.
If you want gold as insurance, you typically focus more on building your position than picking the perfect day.
General Long-Term Approach:
Buy in small amounts over time.
Instead of chasing the rally, invest more on dips.
Keep enough cash to act when market volatility returns.
What Can Go Wrong:
Buying too much, too fast, at record levels.
Panicking if the price fluctuates 5% to 10% in a week.
If you trade over weeks to months, your entry becomes even more critical because you need to ensure the trade fits within your defined time horizon.
General Approach:
Wait for the rally to cool, then buy at a higher low.
Use clear invalidation levels so a bad day doesn’t become a big loss.
Avoid adding more if the price falls below major support levels.
If you trade over hours or days, you are not “investing in gold.” You are engaging in volatility trading.
General Short-Term Approach:
Trade around support and resistance levels.
