Gold's January: A Record and a Sharp Reset

5 min read

January will be remembered as one of the most remarkable months in the long history of gold. The price passed another round-number milestone. It set a new all-time high. Then it suffered its steepest one-day fall in more than forty years. Yet when the month closed, gold was still up by around 13%. Both halves of that story matter. Neither should be read on its own.

What drove the surge

Gold entered 2026 after a gain of around 64% in 2025, which we looked back on in Gold's Best Year Since 1979. January picked up where December left off. Early in the month a federal inquiry was opened into whether Federal Reserve Chair Jerome Powell had misled Congress over the renovation of the Fed's buildings. Washington pressed its claim on Greenland and threatened fresh tariffs on European allies. By the last week of the month the dollar had sunk to a four-year low.

Each of those headlines pointed in the same direction. When savers and institutions start to doubt the independence of the body that issues the world's reserve currency, they look for money that no institution issues. That is the role gold has played for thousands of years. It played it again in January.

A weaker dollar adds to the effect. Gold is priced in dollars around the world, so when the dollar falls, gold becomes cheaper for buyers paying in pounds, euros or yen. That brings in more buyers, which pushes the dollar price higher still.

Another milestone, ten months on

Gold passed the milestone on 26 January. Three days later, on 29 January, it reached a new all-time high, more than 20% above where it began the year. In pounds it set a fresh record too.

In April last year we wrote about what gold milestones really measure, when gold had just passed an earlier one. That was only ten months before. The point still stands. An ounce of gold in January was the same ounce it was last spring. What changed was the paper money it is priced in. Every round number gold passes is also a record for how much buying power the dollar has lost against it.

The fall

On 30 January the White House named Kevin Warsh, a former Fed governor and a long-standing critic of the central bank, as its choice to succeed Jerome Powell when his term as chair ends in May. Markets read Warsh as more hawkish than expected. The dollar jumped. Spot gold fell 9.5% in a single session, its steepest daily drop since 1983. Silver fell even further.

A move that size makes headlines. It also needs context. Much of January's final surge came from fast money: traders using borrowed funds and futures contracts to chase the price higher. When the mood turned, many of them had to sell at once to meet margin calls. Selling begets selling. That is how a parabolic rise unwinds. It says far more about the traders involved than about gold itself.

For anyone who bought in the final days of January, a fall like this is uncomfortable. But a coin bought to keep for years is best judged over years. Even after the fall, the price ended the month around 13% higher than it began, which shows how much of the month's gain survived the selling.

How a margin call works

It is worth explaining what a margin call is, because it explains the speed of the fall. A trader in gold futures does not pay the full value of the gold. They put down a deposit, known as margin. The rest of the position is in effect borrowed.

If the price moves against them, the broker asks for more money to cover the loss. A trader who cannot pay at once is closed out, which means the position is sold for them. On a day when thousands of traders face the same call at the same moment, the selling comes all at once. Each forced sale pushes the price lower, which triggers the next round of calls. That is why a fall of this size can happen in hours rather than weeks.

Why sharp falls belong in a bull market

We wrote in November about why corrections strengthen a bull market and last May about how volatility is the price of admission. Both apply here. Every great run in gold has included violent days. The 1970s bull market saw gold nearly halve between 1974 and 1976 before it rose roughly eightfold to its 1980 peak. Long-term holders who understood why they owned gold were the ones who saw the whole move.

That mid-decade fall came at a hard moment. The Federal Reserve had pushed its key rate up to 9.71% by November 1973 and America was in recession from November 1973 to March 1975. High rates made cash look attractive for a while. The inflation underneath had not gone away, which is why gold's rise later resumed.

The person who owns physical coins outright has one important advantage on a day like 30 January. Nobody can make a margin call on a Britannia in a drawer. There is no lender to repay and no forced sale. The decision to hold or sell stays entirely with the owner.

The question that has not gone away

Last summer we asked who controls the printing press. January showed how much that question matters to markets. A new chair may be more cautious on rates than many feared. But no chair can change the arithmetic of government debt. No chair can create gold either.

History shows why markets watch the choice of chair so closely. Research published in 2006, drawing on the Nixon White House tapes, showed how President Nixon pressed Fed Chair Arthur Burns for easier money before the 1972 election. In December 1971, told of a cut in the discount rate, Nixon replied: "Just kick 'em in the rump a little." American inflation went from 3.6% in 1972 to 11.8% in 1974. A chair's willingness to say no to the White House is not a small detail. It shapes the value of every dollar for years.

Central banks understand this better than anyone. According to the World Gold Council, they added 863 tonnes to their reserves in 2025, well above the long-run norm. By the end of 2024 gold already made up about 20% of global official reserves, against 16% for the euro, according to the European Central Bank. Official holdings stood at around 36,000 tonnes, close to the peak of roughly 38,000 tonnes reached in the mid-1960s.

Private buyers have played their part as well. The World Gold Council reports that worldwide demand for gold bars and coins came to 1,186 tonnes in 2024. Central banks bought more than 1,000 tonnes that year, the third year in a row above that level.

That is the backdrop against which January should be judged. A record, a sharp reset and a monthly gain of around 13%. The underlying reasons people hold gold were the same at the end of the month as they were at the start.

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Sources

This article is for information only. The value of gold can go down as well as up.

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Gold Insights are independent articles, researched and written by our own team at Gold Tier Advisory.