Will gold prices repeat the crash and bear market of 2011?

From 2025 to early 2026, the international gold price experienced an unprecedented upward trend, rising from around $2,500/oz to break through the $5,000/oz threshold in January 2026, and once neared $5,600/oz, setting a new historical record. In my view, this bullish rally is not just a short-term hype; there are three core logics behind it.

First, global central banks have continued to significantly increase their gold reserves. In recent years, to balance asset allocation, diversify the risk of relying on a single currency, and cope with frequent international financial frictions, central banks have chosen gold as a long-term and stable store of value. The rigid demand for physical gold has consistently provided market support.

Second, geopolitical risks globally have become the new norm and are intensifying. Regional conflicts have escalated, cross-border supply chains are being restructured, and ongoing strategic competition among major countries persists. In such an uncertain environment, gold remains the premier safe-haven asset for capital in the markets.

Third, there has been a consensus in the market regarding the Federal Reserve's monetary easing policies. Towards the end of 2024 and into 2025, signals of a weakening US economy became increasingly evident. Benchmark interest rates started to decline from high levels, and real interest rates (discounting for inflation) remained low or even negative in certain periods, directly reducing the opportunity cost of holding gold. At the same time, the US dollar index experienced a temporary decline, which in turn provided upward momentum for gold priced in dollars.

The combination of multiple favorable factors formed a positive cycle: stable physical demand, sustained inflows of speculative capital, and heightened risk aversion worked together to drive gold prices to repeatedly break through key resistance levels.

However, this trend saw a significant reversal in February this year, with gold prices retracing more than 10% in a single month, thus initiating a correction.

The core trigger lies in US economic data which sharply exceeded market expectations. Employment and consumer data demonstrated resilience, and on January 28, the US Treasury Secretary reiterated the strong dollar policy, leading to a swift dollar rebound. Investors began to reassess the pace of Federal Reserve rate cuts, with the market increasingly skeptical of previous optimistic expectations for rapid rate reductions. On top of the profit-taking pressure from accumulated gains, sticky inflation data, and a large amount of profit-taking from winning positions, there was concentrated position reduction and deleveraging in market gold holdings.

The correction pressure intensified in March. The full-scale outbreak and rapid escalation of the US-Iran conflict exposed the Hormuz Strait shipping channel to significant risk, casting doubt over the continuity of global oil supplies. Brent crude spiked from around $80/barrel and quickly breached $120/barrel. The sharp surge in oil prices directly fueled rising inflation expectations across the market, prompting a major reevaluation of the Fed's rate path: previously, the market bet on at least three rate cuts in 2026, which later shrank to one or even none for the year, with forward rate expectations moving up across the board.

US Treasury yields rose in tandem, the US dollar index strengthened, and gold, as a non-interest-bearing asset, quickly lost short-term appeal. Over the past three months, federal funds rate futures show market expectations for year-end rates rising from around 3.5% to above 4.5%—such drastic reassessment has seldom been seen in recent years. As a result, spot gold retraced from historical highs, at one point falling to the $4,100/oz range, sparking widespread debate: will this correction repeat the dramatic crash seen in 2011?

Looking back at the 2011 super bull market in gold, there are indeed some overlaps with the present rally. After the financial crisis in 2008, the Federal Reserve implemented quantitative easing monetary policy, slashing the benchmark rate to near zero and making large-scale purchases of US Treasuries to release liquidity, causing the dollar to continually depreciate. The European sovereign debt crisis spread, and debate over the US debt ceiling peaked between July and August of 2011. Market-wide fears of excessive monetary easing, runaway inflation, and global financial system risk drove massive capital flows into gold as a safe haven.

International gold prices surged from a low of $700/oz in 2008 to hit a record high of $1,920/oz in early September 2011—a cumulative gain of over 150%. Even though corrections of 10%-20% occurred during the bull market, each adjustment was quickly repaired with new highs, entrenching one-way thinking in the market that "gold only rises and never falls."

The key turning point in the crash occurred in August 2011. The US Congress barely reached an agreement on the debt ceiling, after which S&P downgraded the US sovereign credit rating, causing a short-term spike in panic. Subsequently, however, Fed Chair Ben Bernanke sent a clear signal at the Jackson Hole Global Central Bank Conference that there would be no new round of quantitative easing in the short term, shattering market expectations for further easing.

After the news was confirmed, global stock markets weakened simultaneously, triggering a global liquidity squeeze. Gold positions established via leverage were forced to be sold for cash, the US dollar index reversed and surged, and real yields climbed rapidly. In just a few weeks, gold prices plummeted more than 20% from their highs, dipping to around $1,500/oz, and subsequently entered a years-long correction cycle. This deep retracement was the inevitable result of the reversal in interest rate expectations, tightening market liquidity, and the bursting of speculative bubbles.

Comparing today's market environment with 2011, there are indeed many similarities: both saw the end of a long-term bull cycle, both were hit by a shift from monetary easing to tightening, and both experienced a strengthening dollar and rising US Treasury yields that suppressed gold prices. In both phases, the market was overly optimistic about central bank policy, and subsequent macro data forced comprehensive expectation adjustments, resulting in concentrated profit-taking and the unwinding of leveraged positions.

However, it is the core differences between the two periods that are key to determining future trends, and these three differences mean that this round will not repeat the crash of 2011.

First, the demand structure is completely different. The rise in gold prices in 2011 was mainly driven by overseas speculative funds and gold ETFs, with market sentiment as the main force. The current market is supported by continued physical purchases by central banks globally—by 2025, net gold purchases by central banks are still at a high level. This is a structurally long-term demand, and it is very difficult for short-term macro fluctuations to reverse this trend.

Second, the persistency of risk is not the same. The 2011 market risk stemmed from internal crises within the financial system. As central banks adjusted policy and economies recovered, safe-haven demand naturally receded. Today, however, geopolitical conflicts, supply chain restructuring, and great power competition are ongoing, systemic risks, and the challenges to globalized trade will not disappear after a single event, making gold's safe-haven value persist for the long-term.

Third, the difference in macro debt levels and policy space is significant. Global debt today far exceeds that of 2011, and inflation displays persistent stickiness. The Federal Reserve’s policy adjustments are now constrained by multiple objectives such as employment and prices, and it is no longer able to quickly normalize monetary policy and tighten liquidity as it did in 2011.

In summary, recent corrections in interest rate expectations do put short-term profit-taking pressure on gold. The inflation worries sparked by surging oil prices have led the market to bet on higher-for-longer rates. Although this scenario shares similarities with 2011 and short-term price volatility is unavoidable, it will not reverse the long-term upward trend of gold.

The recent pullback from historic highs is merely a normal phase of consolidation within a long-term bull market, not a reversal of the overall trend. As long as market participants understand the underlying macro logic, they can avoid the noise of short-term market sentiment and identify reasonable timing for allocation amid price swings. Looking ahead, the key indicators for gold’s long-term movement are still the pace of monetary policy adjustments by major central banks, changes in the global geopolitical landscape, and gold reserve purchase trends by national central banks—three core variables which continue to provide long-term positive support for gold assets.

Editor | Jiao Yang  Layout | Jiao Yang  Visuals | Zhang Zongwei