By Dr. Ghazi Mahmoud
This is not the first time gold prices have surged sharply. However, it is the first time the yellow metal has reached unprecedented record levels at a rapid, almost breathtaking pace. Over the past month alone, gold climbed 10.18%, following a 73.59% rise throughout 2025, including 45.07% in the last six months of that year. It is worth noting that the rise recorded in January 2026 would have been even higher, were it not for the drop in prices during the final days of the month.
As striking as this latest upswing was in both its speed and intensity, the correction that followed was not unexpected, even if its timing was. This is especially true given the disorder that has dominated gold markets, along with the near-hysterical demand for gold and other precious metals. Despite the pullback seen at the end of last week’s trading, gold continues to trade at historically high levels, while central banks around the world keep buying at a steady pace without signs of slowing.
From a historical standpoint, the first major spike in gold prices occurred in 1973, following the October War between the Arabs and Israel, and the oil embargo that accompanied it against Western countries. At that time, the ounce rose to roughly $123.5, helping push the global economy into an era of “stagflation.” That period reshaped investor thinking, with gold increasingly viewed as a store of value rather than simply a monetary substitute for the US dollar, particularly as the vulnerabilities of paper currencies became clearer.
A second major surge took place in January 1980, when gold reached $668 per ounce, after having stood at $243.66 in November 1978. This jump unfolded against a chain of major geopolitical shocks, including the Islamic Revolution in Iran, the US hostage crisis, and the Soviet invasion of Afghanistan.
These events between 1978 and 1980 fueled a sharp rise in demand for gold and carried prices to what was then a historic peak. The Federal Reserve ultimately curbed that upward run by pushing interest rates to unprecedented levels, a move that contributed to a period of relative stability in gold prices that lasted for nearly two decades.
In 2008, gold returned to a phase of intense volatility. After approaching $1,000 per ounce in March, it slipped to around $728 by September of the same year, amid the mortgage crisis that brought down major financial institutions, most notably Lehman Brothers, and paved the way for the global financial crisis spanning 2008 to 2011.
Although price swings persisted, the broader trajectory remained upward. Gold reached $1,826 per ounce in August 2012, before suffering in April 2013 its steepest annual decline, estimated at about 28%. By December, the ounce was trading near $1,200, marking the end of a five-year cycle of gains.
It is also important to recall that gold did not rise at the beginning of the mortgage crisis, but instead fell. The reason lies in a typical crisis dynamic: investors often rush to liquidate whatever can be liquidated, including gold, to cover new losses and meet margin calls. This reveals a fundamental reality: when liquidity becomes the overriding priority, gold is often among the first assets sold.
A similar pattern appeared during the sharp declines in technology stocks and cryptocurrencies in early 2026, when some investors were forced to liquidate profitable gold positions to offset losses elsewhere. Once again, this reinforced the notion that gold, while widely viewed as the ultimate safe haven, is also frequently used as a liquidity source during moments of stress.
The volatility seen since the start of this week reflects the interaction of several forces. On one side, concerns about the Federal Reserve’s independence, weakening confidence in the US dollar, rising inflation, and escalating geopolitical tensions, combined with continued central bank purchases, have all provided support for gold prices.
On the other side, gold’s growing role as a speculative vehicle has intensified volatility and raised risks to price stability. This is especially evident through the widespread use of leverage, futures contracts, contracts for differences (CFDs), and exchange-traded funds (ETFs). These instruments are paper-based contracts, and they help create a market in which the volume of “paper gold” traded vastly exceeds the amount of physical gold actually available.
Because speculators seek rapid gains, they often sell at the first signal of weakness, triggering cascading sell-offs that amplify declines. In such cases, a fall in gold’s price does not necessarily indicate a shift in the metal’s underlying value, but instead reflects what is commonly described as “herd behavior” in financial markets. These declines are frequently short-term and not connected to deeper structural factors tied to gold itself.
A close look at gold price movements since the severing of the link between gold and the US dollar shows that volatility has largely been shaped by the interaction of monetary, geopolitical, and behavioral influences. Gold may retain its role as a long-term store of value, but it remains vulnerable to short-term swings, especially when it becomes an object of speculation.
The paradox, however, is that downturns are often followed by renewed long-term strategic buying, particularly by central banks and hedging investors. This reinforces the idea that volatility does not diminish gold’s position. If anything, it strengthens gold’s role as a strategic asset in an era defined by uncertainty.
