Gold price plummets, then stabilises

(Image credit: Lemon_tm via Getty Images)

It has been a turbulent few days for the price of gold.

The following session, gold went even further to register its latest all-time high, $5,602. But then it fell – and kept falling.

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From that high, the price of gold fell 16.8% in less than three sessions, closing 2 February $4,661. It had been even lower than this earlier in the day, bottoming at around $4,402.

“The move was large because these markets are tight and inventories have been falling, and the fact of course that the recent rally has been so strong,” said Paul Syms, EMEA ETF head of fixed income and commodities product management at Invesco. “Technical measures clearly point to these metals having been overbought.”

Since then, gold has recovered slightly, trading around the $5,000 mark on 3 and 4 February. But the sharp gains, and even sharper selloff, are a stark warning that, for all its appeal as a safe haven asset, even gold carries risk when investors pile into it so eagerly.

What has driven recent gold price movements?

The story for most of January was one of elevated geopolitical tension and a declining dollar.

Both of these are positive drivers of gold prices; the former because gold is seen as a safe haven asset during times of political or financial stress, the latter because gold is priced in dollars (and is also seen as a hedge against inflation).

One of the particular drivers was speculation that US president Donald Trump was set to nominate Rick Rieder, a monetary dove, to replace Jerome Powell as chair of the Federal Reserve. That could have seen US interest rates kept sub-optimally low, even in the face of persistent inflation.

So a large part of the steep decline in the gold price on 30 January was the slightly surprising pick of Kevin Warsh. While he has argued for lower interest rates in the near term, Warsh is broadly regarded as reasonably hawkish.

His nomination saw the dollar index, which measures the strength of the dollar against a basket of other currencies, gain 0.7% while the price of gold fell 9.8% on 30 January.

Gold prices crept back over 3 and 4 February – and simmering tension in the Middle East has been part of the story.

“After a US fighter jet shot down a drone in the Arabian Sea, it’s creating nervousness about the eventual outcome as tensions remain high between Washington and Iran,” said Susannah Streeter, chief investment strategist at Wealth Club. “The military action has prompted another move back into safe havens, with gold and silver adding to their recovery rally.”

Think you know your gold? Test your knowledge in our gold quiz here.

Is the gold rally over?

The selloff will have unnerved gold investors, especially those who added it to their portfolio as a risk-off asset.

But while the pullback was dramatic, and underscores that there are always risks involved in investing in assets that have seen rapid gains, experts don’t believe that it necessarily marks the end of the gold bull market.

“We think that fundamentals remain intact. Central banks continue to anchor demand, with roughly 800 tonnes of buying expected in 2026, increasingly targeted in tonnes rather than value,” said Lale Akoner, global market analyst at eToro. Targeting quantity rather than value of gold makes this core source of gold demand less sensitive to changes in the price of gold.

“Even with some moderation, expected 2026 demand remains comfortably supportive,” Akoner added.

How to gain exposure to gold prices

If you are considering where to invest for 2026 and want to add some gold exposure, there are three main approaches.

The first one is investing in the metal itself through a financial contract, such as an ETF or exchange-traded commodity (ETC).

Investments into these kinds of products are another factor helping to support gold prices this year.

“European investors are getting involved, having added over $6.5 billion to gold ETCs in 2025 alone, reversing the outflows of 2024,” said Tom Bailey, head of research at HANetf.

See our article on the best gold ETFs for more information.

You can also get indirect exposure by investing in the miners that dig gold out of the ground. This can be done by investing directly in their shares, or by buying a gold fund or investment trust.

Lastly, you can buy physical gold bars or gold coins.

In terms of how much gold to hold in a portfolio, Tom Stevenson, investment director at Fidelity International, suggests around 5-10% is a good amount – which is about the same as you might hold in cash.

“The two offer insurance and dry powder to complement the growth and stability of the shares and bonds that make up the bulk of a balanced portfolio,” he comments.

Dan is a financial journalist who, prior to joining MoneyWeek, spent five years writing for OPTO, an investment magazine focused on growth and technology stocks, ETFs and thematic investing.

Before becoming a writer, Dan spent six years working in talent acquisition in the tech sector, including for credit scoring start-up ClearScore where he first developed an interest in personal finance.

Dan studied Social Anthropology and Management at Sidney Sussex College and the Judge Business School, Cambridge University. Outside finance, he also enjoys travel writing, and has edited two published travel books.