What gold’s past bull runs tell us about where price could go next

Precious metals markets experienced a volatile week, marked by a sharp sell-off in gold followed by a significant rebound. By Wednesday morning, spot gold was approaching a 3% increase, settling around $5,079.4 an ounce, while New York gold futures jumped 3.3% to $5,093.80. This recovery follows a nearly 10% decline on Friday, triggered by the nomination of Kevin Warsh as the next Federal Reserve chair.

Gold’s Recent Performance and Historical Context

Gold, often considered a safe haven asset, had seen substantial gains, increasing 66% over the course of 2025 and continuing into early 2026. However, the nomination of Kevin Warsh as Federal Reserve chair initiated a downturn that extended into Monday. The market began to show signs of recovery on Tuesday, gaining over 6%.

Market analysts note that pullbacks are common during gold bull markets. AJ Bell’s Investment Director Russ Mould pointed out that gold is currently in its third major bull run since 1971, and each of the previous two runs “witnessed several major pullbacks.” The longest correction during the 1971-1980 bull market lasted 105 days, with a peak price decline of 19.4%.

Central Bank Influence and Market Sentiment

The current market environment differs from past cycles due to the significant and sustained demand from central banks. While central bank net purchases of gold decreased slightly to 328 tons in 2025, down from 345 tons the previous year, this demand still provides a structural support not seen in previous episodes. George Cheveley of Ninety One noted that this demand suggests gold’s current strength aligns more with a late-cycle environment than a speculative rally.

Despite some analysts suggesting gold may be overvalued, Barclays strategists believe a premium to its fair value of around $4000 appears durable. They cite inflation, concerns about U.S. Policy, and the decline of the dollar as supporting factors. UBS analysts, in a note titled “Not the end,” indicated that the sell-off was the largest in 13 years but doesn’t necessarily signal the end of the bull market.

Looking Ahead

The UBS analysis suggests that gold bull markets typically end when central banks regain credibility and shift to a new monetary policy. Since Kevin Warsh has not yet demonstrated the same credibility as former Chair Paul Volker, UBS does not believe this is the end of the current bull market. The firm forecasts gold could reach $6,200 next month before falling to $5,900 by year-end.

The U.S. Dollar index has declined by over 10% in the past year, fueled by concerns about central bank independence and an unpredictable policy environment. UBS indicates that gold is currently in the mid-to-late stage of its bull market, characterized by new peaks and intermittent drawdowns of 5-8%.

Frequently Asked Questions

What triggered the recent sell-off in gold?

The sell-off was sparked by the nomination of Kevin Warsh as the next Federal Reserve chair.

How does central bank demand impact gold prices?

Central bank demand has become a more important driver of the market than in previous episodes, providing a degree of structural support to gold prices.

What factors could potentially end the current gold bull market?

Sustained elevated real interest rates, a structurally stronger U.S. Dollar, improved geopolitical conditions, and fully re-established central bank credibility could potentially end the current bull market.

Given the current economic and political landscape, how might continued uncertainty influence the future trajectory of gold prices?