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

The Story

What’s actually glittering is gold. That’s what the new quote should be after what the world witnessed over the past week. Every major commodity and market saw gold and silver prices swing further than ever before. In fact, gold was set for its biggest daily gain yesterday since 2008.

And these aren’t slow moves or steady climbs. These fast rallies have been happening so frequently that it looks like the new normal for all of us. But it leaves us all perplexed as to what the market is reacting to exactly.

Despite the volatility we’re all seeing, nothing much seemed to have changed in terms of expectations. On Monday, JP Morgan said it expected gold prices to hit $6,300 an ounce (28.3 grams) by the end of 2026, far above current values.

That suggests the volatility we’re seeing isn’t a sign of the rally breaking down, but something happening within a longer bull run.

But here’s where things start to look odd. On paper, the rally shouldn’t be this erratic.

Take just the past week in India. The country signed a free trade agreement with Europe — easily one of the most significant trade deals in recent history. Shortly after, the US announced a sharp cut in tariffs on Indian goods, bringing rates down from 50% to 18%. Not perfect, but a clear improvement after a turbulent year for trade relations.

Normally, this is where gold takes a breather. Even Indian equity markets rallied on the tariff news. When trade deals are signed, tariffs fall, and visibility improves, money typically rotates 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 had increased, not eased. Prices swung violently even on days when no major data releases or policy announcements came through. And they kept pushing towards all-time highs, even as parts of the global economy appeared more stable than they had months earlier.

That’s what makes this rally unsettling. Not because prices are rising — but because they’re rising 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 sea storm, it’s because it is. And like any storm summoned by Poseidon (a Greek god), it didn’t come from a single blow — it came from the strike of a trident.

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

Let’s start with the first prong: 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 trading futures (a bet on where the price of something including a stock, index, commodity or precious metal, will be at a future date) doesn’t 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, gains and losses are settled daily. If the futures price moves in your favour, money gets added to your margin account. If it moves against you, money gets deducted. And if losses get too large, you’re asked to add more funds.

This is exactly how gold futures work as well. The volatile prices of gold made CME increase margins for gold futures from roughly 6% to about 8% of contract value. For silver futures, the margins jumped from around 11% to 15%.

These new rules went into effect from Monday’s market close. And although the margin hikes didn't change the fundamentals of either metal, they compressed liquidity and forced highly leveraged traders to cut or rebalance positions. That forced traders to post more collateral to hold the same positions.

Now with fewer traders you’d think the value of silver and gold would change. And it did for a brief period of time, when both metals fell reacting to the news on Friday. But it also did something else — drain leverage and liquidity at exactly the wrong moment, exaggerating every price move that followed.

That’s where the second prong 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 chair of the Federal Reserve. But why does this matter, you ask?

Because the Federal Reserve sits at the very top of the global monetary system. Its 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 ripple instantly through precious-metal markets.

Sure, gold on its own doesn’t generate income but people still compare it with interest bearing assets like fixed deposits or bonds. And when interest rates are high, holding gold feels valuable even though you’re missing out on interest from these assets. But when rates fall, that opportunity cost of holding gold drops.

That’s why a Fed chair nomination can move gold prices around the world within hours, as it did with Kevin Warsh’s. For months, traders had been betting that Trump would pick a Fed chair who would push for lower rates. But Warsh is better known for doing the opposite. And gold prices don’t wait for rate hikes to actually happen because people start buying gold early in the expectation of money losing its value in the future.

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

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

This was the same year when gold hit its all-time highs 53 times all in the same year, 801 tonnes of gold were bought in the form of ETFs while bar and coin purchases went to a 12-year high.

This combination of robust investment demand and sustained official buying means there’s more real money chasing physical metal than ever before. When underlying demand is this strong, price dips tend to be short-lived, because 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 aren’t being held up by sentiment alone, but by real consumption and reserve accumulation happening across the world. Once gold was pushed higher by the first two prongs, the third made sure it stayed there.

And that’s what finally explains the paradox investors are struggling with. The storm looks violent on the surface, but the seabed beneath it is unusually solid.

Looking back, this rally won’t be remembered just because gold prices climbed, but for how differently they behaved along the way. It rose on good news and bad, stumbled without falling, and kept finding buyers. What looked like chaos was really the market adjusting to new forces — tighter rules, shifting money, and record demand pulling in the same direction.

And that’s why, maybe when the dust settles, what actually glitters will still be gold.

Until then…

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