Gold’s rally surpasses US$5,000 amid bond volatility concerns

By Newsdesk

February 09 2026
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In an extraordinary start to the year, gold prices have surged past the US$5,000 mark, marking a significant milestone in the precious metal's market. January witnessed a remarkable 14% rally, closing the month at US$4,982 per ounce, just shy of the new benchmark. This surge included 12 all-time highs throughout the month, demonstrating gold's strength amid global market uncertainties.

Gold’s rally surpasses US$5,000 amid bond volatility concerns

The impressive rally was not without its volatility. The final days of January saw large intraday swings, reflecting the unpredictable nature of the market. According to the Gold Return Attribution Model (GRAM), a substantial portion of January’s return was attributed to implied volatility, accounting for approximately 50% of the gains. This indicates significant activity in the options market, which is currently classified under risk and uncertainty but may also reflect market momentum.

Supporting this bullish trend, global gold exchange-traded fund (ETF) flows added 120 tonnes in January, setting a new record with a valuation of US$669 billion. The demand was primarily driven by Asia, which contributed 62 tonnes, followed by North America with 43 tonnes, and Europe with a more modest inflow of 13 tonnes.

While gold continues to shine, the bond market faces an uphill struggle. Geopolitical tensions have been a significant factor in recent market volatility, but analysts suggest this influence may temporarily wane, shifting the focus back to macroeconomic fundamentals. In the United States, the combination of easier monetary policy and fiscal stimulus is expected to keep the economy running hot, potentially reigniting inflation risks.

"The consensus view is that inflation will ease back to the subdued levels experienced prior to the pandemic," said a market analyst. "However, inflation risks could be greater than investors think."

Several factors contribute to the potential resurgence of inflation. A neutral rate higher than the Federal Open Market Committee's current estimates, the lagged effects of tariffs, and possible fiscal support through renewed Affordable Care Act subsidies are among the key elements. Additionally, a tighter labour market, looser financial conditions, and rising household inflation expectations add to the inflationary pressures.

Market signals regarding inflation are mixed. The decline in implied rates volatility, known as MOVE, suggests a more benign near-term inflation narrative and reduced policy uncertainty. However, term premia remain high, indicating that investors are still pricing in significant medium-term inflation and supply risks, especially given persistent budget deficits.

"The stock–bond correlation typically turns more positive when the dominant shock is inflationary, supply-driven, or fiscally driven," explained a financial strategist. "Both asset classes can sell off together under these conditions."

Recent negative inflation surprises have helped reduce the stock-bond correlation, but this relationship remains unreliable unless a serious downside market stress environment emerges. A renewed upswing in inflation could test the credibility of the incoming Federal Reserve leadership. Any indication of a more hands-off approach could bolster gold demand through stronger inflation-hedging demand and a higher stock-bond correlation. Conversely, a clear shift towards policy hawkishness might curb gold demand in the short term.

"The recent run-up in gold prices probably warrants a pause," noted an industry expert. "But we see continued investment demand as a feature of 2026."

Geopolitical factors are expected to remain a primary driver of gold prices, with macroeconomic conditions potentially reinforcing this trend. A renewed rise in inflation expectations, particularly amid fiscal support ahead of mid-term elections, could push the stock-bond correlation higher.

Risks to gold's momentum mainly stem from its elevated prices and the potential for a sustained easing in geopolitical tensions. With the new Federal Reserve leadership in place, markets will closely watch how the incoming chair navigates the challenges ahead. Despite previous criticisms of Powell's strategy, the new leadership may continue the status quo, leaving yields higher for longer and potentially favouring equities through strong growth.

As the market adjusts to these dynamics, the interplay between gold, bonds, and equities will remain a focal point for investors navigating the complex landscape of 2023.

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