Gold is volatile. Question is not.

In today’s Finshots, we break down why gold has moved with extreme volatility over the past week.

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The Story

What really glitters is gold. That’s what the new quote should be after what the world has seen this past week. Every major commodity and market has seen gold and silver prices swing further than ever before. In fact, gold was yesterday for its biggest daily gain since 2008.

And these are not slow movements or steady climbs. These rapid rallies happen so often that it seems like the new normal for all of us. But it leaves us all confused as to what exactly the market is reacting to.

Despite the volatility we all see, nothing much has changed in terms of expectations. Monday, JP Morgan said he expects gold prices to reach $6,300 an ounce (28.3 grams) by the end of 2026, well above current values.

This suggests that the volatility we are seeing is not a sign that the rally is breaking down, but something that is happening within a longer bull run.

But this is where things start to look strange. On paper, the rally shouldn’t be that volatile.

Just take the last week in India. The country has signed a free trade agreement with Europe – easily one of the most important trade deals in recent history. Soon after, the US announced a sharp cut in tariffs on Indian goods, dropping tariffs from 50% to 18%. Not perfect, but a clear improvement after a turbulent year for trade relations.

Normally, this is where gold takes a break. Even Indian stock markets rallied on the tariff news. When trade deals are signed, rates fall and visibility improves, money typically turns out of safe havens and back into riskier assets. That’s how gold has behaved for decades.

Except this time, it didn’t.

Gold and silver were the exception – moving as if uncertainty increased, not eased. Prices swung violently even on days when no major data releases or policy announcements came through. And they continued to push toward all-time highs, even as parts of the global economy looked more stable than they had months earlier.

That’s what makes this rally disturbing. Not because prices rise – but because they rise when the usual reasons no longer fully apply.

And the reason it’s hard to understand is because of trying to see the rally as one big reason or headline.

If this gold rally feels less like a smooth tide and more like a sudden ocean storm, that’s because it is. And like any storm that Poseidon (a Greek god) summoned, it didn’t come from a single blow – it came from the attack of a trident.

Each spike hit a different part of the market, but together they drove prices violently higher.

Let’s start with the first point: the market mechanics of CME.

Last Friday, the CME Group, the world’s largest commodities and derivatives exchange, changed the margin rules for gold and silver futures after extreme price swings.

Simply put, anyone who trades futures contracts (a bet on where the price of something, including a stock, index, commodity or precious metal, will be at a future date) does not pay the full value of the contract upfront. Instead, they put down a small amount called a margin, which is a percentage of the contract’s value. As prices move, profits and losses are settled daily. If the futures price moves in your favor, money is added to your margin account. If it moves against you, money is deducted. And if losses become too big, you are asked to add more funds.

This is exactly how gold futures work too. The volatile prices of gold have caused CME to increase margins for gold futures from around 6% to around 8% of contract value. For silver futures, the margins rose from around 11% to 15%.

These new rules came into effect from Monday’s market closes. And while the margin increases haven’t changed the fundamentals of either metal, they have squeezed liquidity and forced highly leveraged traders to cut or rebalance positions. This forced traders to post more collateral to hold the same positions.

Now with fewer traders you would think the value of silver and gold would change. And it did for a short time, when both metals fell respond to the news on Friday. But it also did something else – leveraged and drained liquidity at exactly the wrong moment, exaggerating every price move that followed.

This is where the second point comes into play: expectations around money.

On Friday, just hours after the CME Group’s announcement, US President Donald Trump named Kevin Warsh as his nominee for the next chairman of the Federal Reserve Board. But why does it matter, you ask?

Because the Federal Reserve sits at the very top of the global monetary system. His chair determines the future of US interest rates and by extension the US dollar, also the world’s reserve currency.

When markets expect tighter policy, the dollar strengthens. When they expect an easier policy, the dollar weakens. And since gold and silver are priced globally in dollars, even small shifts in those expectations immediately ripple through precious metals markets.

Certainly, gold on its own does not generate income but people still compare it with interest bearing assets like fixed deposits or bonds. And when interest rates are high, it feels expensive to hold gold because you miss out on interest from these assets. But when rates fail, the opportunity cost of holding gold falls. And gold prices don’t wait for interest rate cuts to actually happen because people start buying gold early in the expectation that money will become cheaper in the future.

That’s why a Fed chair nomination can move gold prices around the world within hours, as with Kevin Warsh’s. Traders had been betting for months that Trump would pick a Fed chair who would push for lower rates. But Warsh is more famous for doing the opposite.

Which brings us to the third and final point: the demand for gold.

According to the World Gold Council, global demand for gold has taken a hit 5000 tons in 2025, the first time on record. This includes everything from jewelry and electronics to coins and central banks. Out of the total demand, 863 tonnes of demand came from central banks alone.

It was the same year that gold reached its all-time highs 53 times in the same year, 801 tons of gold were bought in the form of ETFs while bullion and coin purchases hit a 12-year high.

This combination of strong investment demand and continued official purchases means that there is more real money chasing physical metal than ever before. When underlying demand is this strong, price declines tend to be short-lived, as investors and institutions see any pullback as a buying opportunity rather than a reason to sell.

That’s why this rally feels so different from the past. Prices are held up not by sentiment alone, but by actual consumption and reserve accumulation occurring around the world. Once gold was pushed higher by the first two teeth, the third made sure it stayed there.

And this is what ultimately explains the paradox that investors struggle with. The storm appears violent on the surface, but the seabed underneath is unusually solid.

Looking back, this rally will not be remembered just because gold prices rose, but for how differently they behaved along the way. It has risen through good news and bad news, stumbled without falling, and continues to find buyers. What looked like chaos was actually the market adjusting to new forces – tighter rules, money shifting and record demand pulling in the same direction.

And that is why, perhaps when the dust settles, what actually glitters will still be gold.

Until then…

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