By the end of last week, spot gold prices settled at $4,065 per ounce, recovering from this year’s low of $3,869, recorded on October 30.
Experts note that 2026 has been a rather unpredictable year for gold. Many observers argue that the precious metal has largely lost its traditional role as a hedge against inflation and geopolitical instability.
At the same time, analysts agree that the gold market has seen an increase in speculative trading, though much of this frenzy has subsided in recent months as the price approached levels below $4,000 per ounce.
Gold remains in a state of short-term uncertainty, squeezed by competing forces and vulnerable to fluctuations in either direction.
A primary risk stems from a potential weakening of stock markets, as investors begin to question the AI investment boom, particularly following a decisive victory by Democrats in the U.S. midterm elections, with many questioning the necessity of building more energy-intensive data centres.
A decline in stock markets often compels investors to sell off other assets, and the liquidation of gold holdings aligns with historical patterns observed during stock market corrections.
However, short-term weakness in the stock market could eventually prove positive for gold in the medium term, especially if that weakness spreads to the broader real economy. One reason gold has struggled since reaching a record high in January is a shift in expectations regarding U.S. monetary policy, with the outlook moving toward potential interest rate hikes.
Meanwhile, the growing weakness in the stock market and the recent drop in oil prices, driven by renewed hopes for an end to the Iran conflict, could shift the monetary policy stance back toward a neutral position, or perhaps even toward interest rate cuts next year.
While the short-term outlook for gold remains uncertain and dependent on developments in the stock market and the situation in Iran, gold continues to be an attractive long-term alternative for the world’s central banks.
According to the World Gold Council (WGC), central banks purchased 321.2 tonnes of gold in the third quarter, an increase from 296.3 tonnes in the previous quarter and the highest level seen since late 2024.
Analysts believe that a decline in prices below $4,000 per ounce will encourage further buying by central banks during the current quarter.
Investors are also showing greater interest in gold. WGC data indicates an inflow of 19 tonnes into exchange-traded funds (ETFs) in October, following a 211.2-tonne inflow in the third quarter, a reversal from the 47.3-tonne outflow recorded in the second quarter.
A third segment of gold demand comes from the jewellery sector, led by China and India, which together account for nearly two-thirds of global demand. In this area, the recent price decline is expected to boost demand for jewellery, particularly ahead of major holidays.
According to WGC, jewellery gold demand in India reached 99.9 tonnes in the third quarter, the highest level seen since last year. In China, jewellery demand rose to 71.9 tonnes in the third quarter, up from 55.7 tonnes in the second quarter.
Hélène Tarin, Editor-in-Chief of the Asian Bureau, Rough&Polished
