Gold remains a crucial strategic asset and serves as an effective diversifier for investment portfoliosAI Quick ReadGold remains a crucial strategic asset and serves as an effective diversifier for investment portfolios, even during times of heightened volatility, said World Gold Council in its latest report.
The council highlighted that swings in gold prices have become more pronounced in 2026, caused by a combination of macroeconomic and market influences. A significant factor contributing to this has been the dampening of expectations for interest rate cuts by the Federal Reserve, paired with an increase in bond yields.
The international trade association noted that these changes were shaped by events such as the appointment of Kevin Warsh at the end of January and rising tensions in the Middle East in February, which amplified concerns about inflation.
Moreover, the World Gold Council stated that while gold prices have witnessed occasional rebounds, ongoing geopolitical tensions—especially the conflict in the Middle East—have heightened liquidity demands, applying pressure on gold, particularly as major trading centers like Dubai encounter disruptions.
Significantly, the council also noted that gold is not the only asset witnessing this trend. Volatility in equities and bonds has also surged sharply, especially in March, indicating a wider risk-averse sentiment. These trends have historical precedence; during the Global Financial Crisis and the COVID-19 pandemic, investors frequently liquidated gold holdings to fulfill margin calls, due to its high liquidity and earlier price gains.
The World Gold Council, when addressing the question of whether gold's increased volatility will subside, stated that the recent surge in volatility is not expected to be a lasting condition, emphasizing that price fluctuations for gold typically revert to the mean over time. Traditionally, gold's annualized volatility has remained mostly between 10% and 18% on most trading days, even following sharp increases.
The council's evaluation also suggests that the "half-life" of volatility is around 1.6 months, indicating that the effects of a volatility shock usually diminish by half within that timeframe, resembling a pattern seen in equities.
The council noted that, although gold can undergo sudden and notable volatility during stressful periods, these increases have historically been short-lived, with prices gradually stabilizing and returning to long-term averages.
Gold exhibits a low to negative correlation with risky assets, reinforcing its function as a safe-haven investment. Consequently, including gold in a diversified portfolio aids in minimizing overall risk, even during times of heightened volatility in gold itself.
The council also stated that its evaluation of a theoretical portfolio consisting of global stocks and bonds reinforces this perspective. Although gold might experience some decline during times of market stress—often due to investors selling off assets to fulfill liquidity demands—it generally recovers and performs better when uncertainty continues.
As a result, gold adds little to portfolio risk while assisting in reducing overall volatility.
Further, the council added that despite recent increases in volatility, gold remains a key asset in investors' portfolios. It observed that inflation shocks—like the recent spike in oil prices associated with the Iran conflict—tend to cause bond and equity markets to show a positive correlation, as both asset classes experience pressure.
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