Behind Price Volatility, Gold Remains a Diversification Asset

JAKARTA, KOMPAS.com — The sharp rise in gold prices in recent years has raised questions in the global financial markets: has gold’s performance structurally changed, or is it merely experiencing a more volatile phase of its cycle? The World Gold Council (WGC) report attempts to answer this question. In an analysis titled “You asked, we answered: Has gold’s performance structurally changed?” cited on Tuesday (21/4/2026), the WGC assesses the latest dynamics of gold, including the surge in volatility, which it views as reflecting short-term market conditions rather than long-term fundamental changes. The WGC notes that gold’s volatility has broken through its historical upper range and entered the highest percentile since 1971. This increase has been triggered by several macroeconomic and geopolitical factors, including shifts in expectations for US central bank interest rate cuts, the strengthening of the US dollar, and investor profit-taking actions following a very rapid gold price rally. Additionally, market technical dynamics such as stop-loss orders have amplified price movements when gold breaches certain levels. In such situations, investors often sell gold not due to a loss of confidence, but to meet short-term liquidity needs. The WGC assesses that gold price volatility has a mean-reverting character, tending to return to the long-term average after spikes. Historically, gold’s annual volatility has ranged from 10 to 18 percent. Moreover, the half-life of volatility shocks is estimated at around 1.6 months. This finding forms one of the main bases for the WGC’s assessment that there has been no structural change in gold’s behaviour. Amid the price volatility, the gold market’s liquidity has instead shown significant strength. WGC data indicates that gold trading activity surged sharply during the price correction period. At the end of January 2026, the average daily trading volume reached 965 billion US dollars, the highest in history.