Gold Surge Deep-Dive Study: A Structural Bull Market Under a Recalibrated Pricing Framework

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I. Current Price Action: From Peak to V-Shaped Rebound

Gold markets experienced an unprecedented extreme swing in 2026. At the start of the year, COMEX gold futures surged to an all‑time high above $5,794/oz. A deep correction followed, with prices plunging to around $4,000/oz by late June - a maximum drawdown of nearly 30%.

Entering August, gold staged a powerful rebound. The Shanghai Gold Exchange’s Au99.99 broke through RMB 900/g on August 5, surpassed RMB 950/g on August 17, and reclaimed RMB 1,006/g by August 24. Retail jewellery prices – e.g., Chow Tai Fook – reached RMB 1,382‑1,393/g. Internationally, gold logged a weekly gain of over 7% in the first week of August, its strongest weekly rally since January this year.

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II. Drivers: Four Structural Forces

1. Central Bank Buying – The Most Solid “Structural Floor”

This is the core and most persistent driver of the current bull market.

In Q1 2026, global central banks net purchased 244 tonnes of gold, up 17% QoQ; in Q2, net purchases surged to 288.9 tonnes, a 411% QoQ jump and 62% YoY, reaching a four‑year high. Notably, the People’s Bank of China has added gold for 21 consecutive months. The World Gold Council expects full‑year central bank purchases in the 700‑900 tonne range.

Key mechanism shift: After Russia’s assets were frozen by the West following the 2022 Ukraine invasion, emerging markets’ confidence in dollar‑denominated assets was fundamentally shaken. The logic of central‑bank gold buying has shifted from “investment return” to “reserve safety” – creating an asymmetric buying behaviour (“the lower the price, the more they buy”), whose impact now outweighs the traditional real‑interest‑rate factor. Central bank purchases are long‑term strategic actions, immune to short‑term price noise, providing a consistent bid that underpins the market.

2. Dollar Credit Weakening – A Fundamental Pivot in the Pricing Anchor

The most profound change in today’s gold market is the recalibration of the pricing anchor – gold is moving away from real rates toward a multi‑factor framework centred on dollar‑credit hedging and de‑dollarisation.

Evidence includes:

· US debt crisis: Treasury debt has exceeded $40 trillion, with interest payments surpassing military spending and fiscal revenues weakening. The US federal deficit is projected at $2.05 trillion in FY2026.

· Accelerating de‑dollarisation: Many countries are concerned about the “weaponisation” of the dollar and the deteriorating US fiscal position, driving a moderate de‑dollarisation trend. Whenever the dollar’s share of global reserves falls, gold’s share rises correspondingly.

· Ripple effects of US‑Japan FX intervention: In July 2026, the US broke a nearly 30‑year convention of not directly intervening in FX markets, joining Japan to stabilise the yen. Japan sold Treasuries to raise funds, further pushing up long‑term yields – signalling that the Fed’s control over long‑end rates and the Treasury market is weakening.

3. US Fiscal Policy and Treasury Buybacks – A “Dual‑Path” Benefit

On August 19, 2026, the US Treasury announced a policy to provide additional liquidity support to the long‑term Treasury market, signalling its intention to suppress long‑bond yields. This creates a rare dual‑path benefit for gold:

· Path 1 (effective): Buyback operations lower long‑term yields → opportunity cost of holding gold declines → bullish for gold.

· Path 2 (underwhelming): If the policy falls short, the perceived risk of US fiscal/debt problems intensifies → gold acts as a credit‑hedge asset → also bullish for gold.

4. Investment Demand – From ETF Outflows to Inflows

In the first half, gold ETFs experienced two large outflows (March and June), mainly from North American investors. But the picture improved in the second half:

· SPDR Gold Trust (GLD) holdings reached 1,047.21 tonnes as of August 21.

· COMEX speculative positioning has retreated to low levels, and volatility has fallen below its 250‑day moving average – historically a signal that often precedes a new leg higher.

· Asian investors have become the “stabilising pillar” – in H1 2026, despite spot gold falling about 5% globally, gold actually rose 13% during Asian trading hours.

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III. Supply & Demand Fundamentals: Consumption Shrinks, Investment Dominates

Demand Side: Structural Shifts

Gold demand is transitioning from consumption‑led to investment‑led:

· Jewellery consumption: Global jewellery demand fell 17% YoY to 278 tonnes, as high prices clearly suppressed traditional purchase intent.

· Physical investment: China (+28%) and India (+17%) led a sharp surge in physical gold investment.

· OTC investment: Q2 OTC and other demand jumped 91% YoY to 327 tonnes.

Total global gold demand in H1 2026 reached 2,522 tonnes, with a dollar value of $380 billion – an all‑time high.

Supply Side: Limited Growth

· Global mine production is expected to reach a record 3,907 tonnes in 2026, but growth is moderate.

· Scrap supply fell 6% YoY in Q2, indicating that existing holders are reluctant to sell – reflecting expectations of further upside.

· All‑in sustaining costs for global miners have risen to $1,552/oz.

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IV. Sustainability Assessment: Structural Bull vs. Short‑Term Volatility

Arguments for “Sustainable” (Long‑Term Structural Factors)

(1) Central‑bank buying has “stickiness” that is irreversible

45% of central banks plan to increase gold reserves over the next 12 months. The underlying drivers – de‑dollarisation, geopolitical risk, and reserve diversification – are all structural and long‑term. State Street analysts note that official‑sector buying is forming a “sticky” source of demand, and official reserve management is undergoing a “persistent shift” – from Treasuries to gold.

(2) Long‑term dollar‑credit erosion

US debt has surpassed $40 trillion and continues to climb, with fiscal deficits persistently high. Markets widely fear that the US may eventually inflate away its debt burden. As long as this trend persists, gold’s value as a “credit‑risk‑free asset” will remain prominent.

(3) Gold’s pricing framework has been fundamentally reshaped

Gold is no longer driven mainly by jewellery or industrial demand; it is now about changes in the global financial system, geopolitical risks, and monetary credibility. Gold is becoming a “strategic reserve core” in the context of global credit transformation.

Arguments for “Temporary/Volatile” (Short‑Term Risks)

(1) Fed policy remains the biggest wildcard

Wells Fargo explicitly states that the Fed is still the core variable. Rising real yields and concerns that the Fed may hike further are the primary headwinds. If inflation rebounds due to oil‑price spikes, the Fed could restart rate increases.

(2) Geopolitics cuts both ways

The current Middle East conflict has a more complex transmission: geopolitical tensions push oil higher → fuels inflation expectations → reinforces rate‑hike bets → actually pressures gold – a stark contrast to the 2022 dynamic when geopolitical shocks directly fuelled a gold bull.

(3) Prices have already rallied significantly

Gold has accumulated considerable gains, and the long‑short debate is intense. In H1, gold posted monthly declines exceeding 10% in both March and June. UBS warns of a potential short‑term dip to $3,850/oz.

(4) ETF flows remain fragile

Global gold ETFs saw net outflows of 44.8 tonnes in Q2, showing that financial‑investment demand is clearly vulnerable to high‑volatility environments. If real rates move higher again, ETF money could flee once more.

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V. Conclusion: Not “If” but “How” – The Bull Is Structural, Not a Bubble

This gold surge is not a short‑term speculative froth; it is a reflection of a structural transformation in the global monetary system.

Gold’s pricing logic has shifted from “real‑rates‑dominated” to a multi‑dimensional framework centred on dollar‑credit hedging and de‑dollarisation. Central‑bank buying is no longer a cyclical fad but a strategic, cross‑cycle reserve‑asset reallocation. As long as the three structural forces – US debt concerns, de‑dollarisation, and geopolitical risks – remain intact, gold’s long‑term upward trend will not reverse.

But the path will be anything but smooth.

Fed policy, oil‑price swings, and geopolitical developments will generate sharp short‑term volatility. The >30% drawdown in the first half proves that a structural bull market does not mean a one‑way rally. Wells Fargo’s description of its target adjustment as “fine‑tuning” rather than a reversal of view – that is the most accurate characterisation of gold’s future: bullish in the long run, but bumpy in the short run.

The World Gold Council notes that the second half of 2026 is a critical juncture, with gold’s performance subject to multiple uncertainties including geopolitics, interest‑rate conditions, and investor sentiment. Dongfang Jincheng’s scenario analysis suggests prices could swing wildly between $3,800 and $5,000+.

One‑sentence summary: Gold’s “raging bull” is rooted in deep structural forces, but investors must brace for violent swings and periodic sharp pullbacks. The question is not “will it rise?” but “at what pace and amplitude?”