How to invest in gold in the second quarter?

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Source: International Financial News

The first quarter of 2026 has come to an end, and the international gold market has staged a rollercoaster of extreme fluctuations: prices surged to break historical records, then sharply retreated to give back gains, and finally bottomed out with a slight rebound. Intense volatility has broken traditional investment logic and prompted market reflections on gold’s safe-haven attributes and pricing mechanisms.

Many investors admit that the gold trend in the first quarter was “torturous,” from initial profit-taking joy, to mid-term losses and anxiety, to later hesitation and confusion. Market swings repeatedly tugged at their mindset, with many lamenting that “previous investment experiences seem to have failed.”

Reviewing the core logic behind this rollercoaster, dissecting the evolution of the future pricing mechanism, and sorting out differentiated investment strategies have become key for investors to grasp the rhythm, reduce risks, and minimize losses.

“Rollercoaster” Market

“This first quarter was too difficult, not only did I not make money, but I lost quite a bit.” A gold investor’s sentiment reflects the common confusion in the market—initially relying on gold’s safe-haven properties to preserve assets, but amid ongoing geopolitical tensions, gold prices fell instead of rising, as if the safe-haven function was temporarily “failing.”

Looking back at the first quarter, London gold prices closed the year at $4,332.505 per ounce and steadily climbed, with market sentiment heating up, reaching a record high of $5,598.75 per ounce on January 29. At that time, many investment banks raised their gold price forecasts, optimism spread, and gold-buying enthusiasm surged. Many investors followed the trend, confident that prices would continue to rise, while some ignored risks and blindly increased their positions.

However, after the peak, the market suddenly turned downward sharply. Gold prices entered a volatile decline. The pivotal moment was the Federal Reserve’s hawkish signals at the March 19 policy meeting, which triggered a sharp plunge. On March 23, spot gold briefly broke below the key support level of $4,100 per ounce, wiping out all gains made earlier in the year. This sudden crash caught many investors off guard, with early profit-takers cashing out and some even incurring losses.

Subsequently, gold prices gradually stabilized and rebounded. By the end of the first quarter, London gold prices remained around $4,500 to $4,600 per ounce, with significant divergence between bullish and bearish views. Data from Wind shows that the first quarter’s cumulative increase in London gold was 8.13%, but the maximum drawdown reached 26.8%, and volatility surged significantly.

“The core driver of this ‘rise—crash—rebound’ pattern is the switching game between two main themes: geopolitical conflicts and policy shifts,” analyzed Wang Weimang, investment manager at Zhonghui Futures Asset Management. Initially, safe-haven demand driven by geopolitical tensions pushed gold prices higher, but subsequent conflicts triggered energy crises and inflation surges, reversing market expectations of Fed easing. Real interest rates and the dollar strengthened, exerting fundamental pressure on gold, an interest-free asset.

Xiao Jingyu, researcher at Xinhu Futures Precious Metals, added that gold price fluctuations show clear phase characteristics: early on, geopolitical uncertainties drove safe-haven demand, amplified by speculative sentiment, making high gold prices inherently fragile; after Middle East conflicts erupted, war uncertainties and rising energy prices boosted inflation expectations, resonating with liquidity tightening trades, further amplifying volatility.

Regarding the counterintuitive phenomenon that “geopolitical tensions rising did not support gold prices,” Shenwan Hongyuan Futures analyst Chen Mengyun explained that this reflects a phase shift in gold’s pricing logic, where liquidity tightening suppressed safe-haven demand.

Chen Mengyun further stated that, initially, during conflict outbreaks, gold prices surged rapidly, perfectly illustrating safe-haven logic; but later, the dominant market factors shifted. Oil prices pushed inflation expectations higher, while market expectations for Fed rate cuts declined, causing real interest rates and the dollar index to rise simultaneously. As a non-interest-bearing asset, higher real interest rates increase the holding cost of gold, prompting safe-haven funds to flow into the dollar. Meanwhile, global risk appetite waned, liquidity tightened, and a large amount of profit-taking at high levels further suppressed gold prices.

Long-term Logic Remains Unchanged

The intense volatility in the first quarter has disrupted many gold investors’ rhythm: some liquidated their holdings, others hesitated. The most pressing question in the market is: does the long-term bullish logic for gold still hold?

Xiao Jingyu believes that the trading logic for gold shifted multiple times in the first quarter (safe-haven → inflation → liquidity tightening). She expects that Middle East geopolitical conflicts will remain an important background for gold prices in Q2. Currently, the situation is at a critical crossroads: liquidity shocks have eased but oil prices remain high, shifting market focus to the long-term impact of high oil prices on inflation and monetary policy.

Wang Weimang predicts that in Q2, gold’s pricing logic may gradually shift from “inflation trading” to “stagflation trading.” She forecasts that gold prices will show a pattern of “short-term bottoming and oscillation, with medium-term trend waiting,” with $4,200 per ounce as a key support level and $3,900 to $4,000 as a strategic accumulation zone. If stagflation becomes confirmed and Fed easing expectations restart, gold’s resilience will strengthen, potentially breaking previous highs again.

Looking ahead to Q2, Xia Yingying, head of the New Energy Metals Research Group at Nanhua Futures, added that the evolution of Middle East tensions, Fed policies, and supply-demand fundamentals will jointly drive the precious metals market. However, the marginal impact of geopolitical events is expected to gradually weaken, and gold prices are likely to revert to a pricing model dominated by monetary policy adjustments and supply-demand fundamentals.

Xia Yingying expects that, after a period of consolidation, gold and other precious metals will gradually recover from recent declines and rebound, with short-term corrections not altering the long-term upward trend.

From a long-term perspective, Chen Mengyun emphasizes that the fundamental long-term logic supporting gold’s rise has not changed. On one hand, geopolitical risks are rising, and the global political-economic order is still being reconstructed; on the other hand, concerns over US fiscal sustainability are intensifying, and Trump’s frequent interventions in Fed independence continue. As a result, de-dollarization will persist, and central banks worldwide will continue increasing gold reserves. Under the de-dollarization trend, gold’s long-term upside remains promising, with potential to break previous highs.

Differentiated Strategies

In the face of high uncertainty and increased volatility in the “golden monkey market,” how to avoid risks and seize opportunities has become the top concern for investors.

Xiao Jingyu suggests that investors with conditions consider buying straddle options, holding both call and put options on gold to capture directional breakthroughs; conservative investors can initiate a gold dollar-cost averaging plan, smoothing short-term fluctuations over time and firmly grasping the long-term allocation value of gold, avoiding being disrupted by short-term turbulence.

Wang Weimang further details the differentiated allocation strategies. She believes that the core investment principle for Q2 is: when the market questions gold’s safe-haven attributes, adopt a contrarian long-term approach, distinguishing short-term noise from long-term trends.

Regarding position sizing, Wang Weimang recommends that conservative investors establish a 5% to 10% basic position at current prices, then gradually add to 15% to 20% on dips, prioritizing low or no leverage assets to reduce risk exposure; if gold falls into an extreme emotional zone of $3,900 to $4,000, they can increase strategic positions to capitalize on potential rebounds driven by industrial demand recovery.

As for investment strategies, Wang Weimang suggests that cautious investors can adopt tactical swing trading, testing positions around $4,300 per ounce, maintaining core holdings for medium-term breakthroughs, and balancing risk and return with gold-silver combinations; aggressive investors should focus on high-volatility opportunities in silver, using options for volatility trading, playing rebounds at key support levels, and closely monitoring industrial demand indicators to catch potential independent silver rallies.

Xia Yingying recommends that in the short term, focus on range trading or low-long positions, strictly controlling positions and stop-losses to avoid volatility risks; in the medium to long term, concentrate on core logic, relying on central bank gold purchases, de-dollarization trends, and Fed rate cut expectations, to buy gold on dips during consolidation, with silver as a flexible auxiliary asset to optimize the portfolio.

Meanwhile, investors should remain alert to potential risks. Xia Yingying reminds that in Q2, four major risks deserve attention: escalation of geopolitical conflicts causing liquidity crises, continued delay in Fed rate cuts, asset-wide declines triggered by liquidity panic, and downward pressure from slowing central bank gold purchases or weak industrial demand for silver. She advises early risk hedging and cautious market responses.