It has been the most volatile year gold has had in over a decade — and the most revealing.
Gold set an all-time high of roughly US$5,589 (~$7100 SGD) an ounce on 28 January. By the end of the second quarter it had fallen more than 20%, its steepest quarterly decline in ten years. By 11 August it had climbed back toward US$4,500 (~$5715 SGD).
Here’s what actually happened, and the one detail most coverage missed.
January: the record
Gold entered 2026 on the back of a multi-year rally and kept going. Safe-haven demand and expectations of falling interest rates pushed it to a peak just short of US$5,600 — a level that would have looked implausible only a few years earlier.
The second quarter: the fall
Then the logic of the market flipped.
Conflict in the Middle East pushed oil prices and inflation expectations higher. Higher inflation expectations meant markets stopped pricing interest rate cuts and started pricing a more hawkish Federal Reserve — which is the environment gold likes least. A US-Iran interim agreement eased the geopolitical risk premium that had supported prices, and a stronger dollar did the rest.
Gold fell more than 20% in a single quarter, dipping below US$4,000 in June — roughly 30% off January’s high.
If you want a single illustration of why gold is not a one-way asset, that quarter is it.
China wound down retail paper gold
Then, in June, the world’s largest bank by assets did something that received little coverage outside the gold market.
Industrial and Commercial Bank of China announced it would stop offering individual customers precious metals trading products linked to the Shanghai Gold Exchange, effective after settlement on 24 July 2026. Postal Savings Bank of China, Ping An Bank, China Guangfa Bank and China Construction Bank issued near-identical notices. Banks had already raised margin requirements to as much as 140%, making the positions uneconomic to hold.
Be precise about what this was. It was not a ban on owning gold in China, and it was not a ban on all paper gold. Physical gold purchases were unaffected. So were non-leveraged products such as accumulation plans and ETFs, and the Shanghai Gold Exchange continued operating normally for institutional participants and physical delivery. New retail accounts through banks had already been restricted for years.
What ended was the banks’ role as intermediaries for leveraged retail speculation on precious metals — a policy line that traces back to 2020, when retail customers lost heavily on oil-linked products after futures turned negative, and Chinese regulators turned firmly against retail leverage.
The detail worth sitting with is what customers were told to do before the deadline. They had three options: close their positions, liquidate their holdings, or take physical delivery.
When the paper product was wound down, physical delivery was one of the exits that remained open. That is the distinction this entire industry runs on, and in June it was drawn by regulation rather than by marketing.
The detail most coverage missed
While the price was falling, the world’s central banks bought more gold than in any second quarter on record.
The World Gold Council’s Gold Demand Trends report, published on 30 July, put net central bank purchases at 289 tonnes in Q2 — a 62% jump year-on-year, during the steepest quarterly price decline in a decade.
That followed a first quarter in which central banks bought 244 tonnes at a cost of around US$37 billion — the highest value for a single quarter ever recorded — and total quarterly gold demand reached US$193 billion, itself an all-time record.
Central banks are supposed to be price-sensitive institutional buyers. In 2026 they behaved like the opposite: the price fell sharply and they accelerated.
Ordinary buyers did the same thing
Bar and coin demand — physical gold bought directly by individuals — jumped 42% in the first quarter to 474 tonnes, the second-highest quarterly total on record.
The pattern held on both ends of the market. Sovereign reserve managers and retail buyers reacted to the same price fall in the same way.
The structural shift underneath
One statistic frames the decade rather than the year: according to Morgan Stanley Research, gold now accounts for a larger share of central bank reserves than US Treasuries — the first time that has been true since 1996.
Reserve managers have been diversifying away from dollar assets since 2022, when the freezing of Russia’s reserves changed how sovereign institutions think about holding wealth inside someone else’s financial system. Emerging market central banks — Poland, Kazakhstan, China and Uzbekistan among them — have led the buying.
The World Gold Council expects full-year 2026 central bank purchases of 700 to 900 tonnes, broadly in line with 2025’s 863 tonnes and far above the pre-2022 norm.
What the year actually demonstrated
Three things worth taking from 2026, whatever you make of gold.
Gold falls. A 20%-plus quarterly drop, in the same year as an all-time high, is a useful corrective to the idea that gold only moves in one direction. Anyone telling you otherwise is selling something.
Price and demand aren’t the same story. The steepest quarterly fall in a decade coincided with record central bank buying. Headline price moves tell you what happened to the price, not what happened to demand.
Paper and physical are not the same product. China’s regulators wound down leveraged retail paper trading while leaving physical ownership untouched — and offered physical delivery as one of the ways out.
The reasons keep shifting. Within eight months the market moved from safe-haven demand, to inflation and rate fear, and back toward expectations of easier policy. Each phase had a confident explanation attached to it. Most of them were written after the fact.
A note on how we write about this
FinMet sells physical gold. We don’t forecast the gold price, and we don’t tell anyone whether to buy.
What we will do is publish what actually happened — including the 20% drawdown, which is the part of 2026 a seller would normally leave out. Gold prices can fall as well as rise, and a year like this one is the clearest possible demonstration.
Figures cited are from the World Gold Council’s Gold Demand Trends reports for Q1 and Q2 2026 and from Morgan Stanley Research, as reported publicly. Details of the Chinese bank announcements are as reported by the South China Morning Post and the banks’ own notices of June 2026. Finmet Pte Ltd (UEN 202022529N) is a registered dealer under the Precious Stones and Precious Metals Act 2019, registration number PS20240000367. FinMet is not a bank, does not take deposits, and does not provide financial advice. Gold prices can fall as well as rise.