Gold 30-Day Volatility Hits 44% at New High Since Financial Crisis, Can Gold Still Be a Safe Haven?

TradingKey - Gold ( XAUUSD) market is undergoing exceptionally intense price turbulence. Following a short-term surge, spot gold prices plunged nearly $1,000 within just two trading days, briefly falling below the $4,400 mark. Market sentiment has fluctuated violently as a result, and there are currently no clear signs of the downward trend stabilizing.

As a traditional 'safe-haven anchor,' gold has long been viewed by investors as a core asset for hedging against geopolitical conflict and inflation risks. However, as global political and economic tensions intensify, gold's performance has shown significant anomalies.

According to Bloomberg data, gold's 30-day historical volatility has surpassed 44%, reaching its highest level since the 2008 financial crisis and rarely exceeding Bitcoin's 39%. This reversal in the volatility relationship between 'digital gold' and 'physical gold' is staggering.

Behind the intense market volatility lies a deep mismatch between the logic of rising gold prices and its structural foundation. Major institutions Citi and JPMorgan Chase have offered starkly different interpretations of this situation.

Citi Warns of Capital-Driven Structural Fragility

Citigroup ( C) noted in a research report released on January 30 that the rapid rise in gold prices this time was not driven by central bank purchases, but rather by massive capital inflows from the private sector—including funds, ETFs, and high-net-worth investors. This pool of capital is estimated to have reached approximately $1 trillion, serving as the strongest driver for the gold market in recent years.

However, it is precisely this market-driven 'super rally' that has sowed structural concerns for gold prices. Citi pointed out that over the past three years, gold investors have accumulated total unrealized gains of approximately $20 trillion. If sentiment reverses, even a 5% profit-taking (roughly $1 trillion) would be enough to offset the current global annual demand for physical gold, thereby delivering a severe shock to market prices.

This reflects the inherent structural fragility of the gold market. The report emphasizes that gold assets account for an extremely low proportion of global household wealth allocation, at only about 0.1%. This means that even a slight upward adjustment in the allocation ratio—for example, from the current 4.1% to 5%—would trigger a massive supply-demand imbalance. The amount of gold required for such a shift would be equivalent to 11 years of global mine supply, or more than half of the world's jewelry and bullion stocks accumulated over millennia.

In other words, the current market simply cannot accommodate a wealth transfer of this scale without sharply driving up prices. As gold is a relatively scarce physical asset, its price must rise significantly to achieve a rebalancing between supply and demand.

Even more concerning is that once the trend reverses, selling pressure from profit-taking could erupt at any moment. Citi vividly noted that this massive pool of unrealized profits hangs over gold prices like the Sword of Damocles. The higher the price, the greater the potential volatility and short-term risk.

Furthermore, the low turnover rate in the gold market exacerbates this risk. During the rally, capital was primarily held in 'heavily concentrated' positions, leaving the market without sufficient liquidity or cushioning mechanisms. This means that any localized profit-taking to lock in gains could quickly escalate into a market-wide sell-off, triggering non-linear and violent price fluctuations.

JPMorgan Remains Bullish on Gold

In contrast to Citi's relatively cautious assessment, JPMorgan Chase ( JPM) remains firmly bullish on gold, raising its price forecast in a recent report to $6,300 per ounce as a year-end 2026 target, up from its previous projection of $5,400. This upward revision is based on optimistic estimates of sustained demand from central banks and investors.

JPMorgan's analysis team noted that while a degree of panic currently pervades the precious metals market, gold's overall fundamentals remain solid. They believe the macroeconomic environment continues to provide favorable support, and the long-term upward trend for gold will persist. Analysts wrote in the report that gold is benefiting from a 'clear, structural, and sustained trend of diversified allocation,' maintaining a staunchly bullish stance over the medium term.

One of the core reasons for this forecast revision is that central bank gold purchases have far exceeded expectations. Data shows that in the fourth quarter of last year alone, global central banks bought approximately 230 tonnes of gold, bringing the annual total to about 863 tonnes, a recent high. Of particular note is that even as gold prices surpassed the $4,000 mark in the fourth quarter, official buying from various nations increased rather than decreased, reflecting the ongoing trend of foreign exchange reserve diversification.

JPMorgan expects central bank gold purchases to remain near high levels in 2026, at approximately 800 tonnes, highlighting its assessment that the official sector will continue to increase gold reserves.

Simultaneously, investor capital continues to flow into gold assets. JPMorgan noted that ETF holdings have recently risen, and retail demand for gold bars and coins is strong, with gold increasingly being incorporated into investment portfolios to hedge against macro risks such as inflation, interest rate volatility, and geopolitical uncertainty.

Although JPMorgan acknowledges that the pace of the current gold price rally has indeed been rapid and the market appears crowded in the short term, they believe the rally has not yet exhausted its potential.

In the report, JPMorgan analysts added: 'Although the air is getting thinner as gold prices rise, we have not yet reached the tipping point where the structural rise in gold prices would collapse under its own weight.'