A staggering 14% rally in January took gold above the US$5,000 mark, cementing the 5k number as a headline to match the first recorded annual 5,000 tonnes of total demand. The month closed at US$4,982/oz and scored 12 all-time highs. But it was not without drama with large intraday swings on the last two days of the month.

Our Gold Return Attribution Model (GRAM) showed an unusually large contribution from implied volatility (c.50% of January’s return), reflecting substantial option market activity. This variable currently sits in risk & uncertainty, although is likely more reflective here of momentum. 

Global gold ETF flows provided plenty of support adding 120t in January to take holdings to a new record, valued at US$669bn. The flows were dominated by Asia (62t) and North America (43t) while Europe saw more modest inflows

Key Price Figures (January 2026)

The month was characterized by relentless momentum, scoring 12 all-time highs before ending with significant intraday volatility.

Performance in Other Major Currencies (Jan Return):

• INR: +23.9% (Record high: ₹176,306/10g)
• RMB: +19.2% (Record high: Â¥1,248/g)
• EUR: +13.0% (Record high: €4,444/oz)

Major Market Drivers

1. Momentum & Options (GRAM Model): Approximately 50% of January’s return was attributed to implied volatility and massive options market activity rather than pure macro fundamentals.
2. ETF Inflows: Global gold ETFs added 120 tonnes (valued at US$669bn), the strongest month on record.
3. Asia: 62t (led by China)
4. North America: 43t
5. Europe: 13t
6. The “Warsh Effect”: Late-month drama was fueled by the nomination of Kevin Warsh as the next Fed Chair. Markets perceive him as a “hawk” favoring a smaller Fed balance sheet, which triggered a sharp intraday correction from the $5,300 peaks.

Macro Outlook: The Inflation Resurgence

While geopolitics dominated January, the narrative is shifting toward resurgent US inflation risks for the remainder of 2026. Key triggers include:

• Tariff Pass-through: Lagged effects of trade policies hitting consumers.
• Fiscal Stimulus: Prospective $2,000 “tariff dividend” checks and ACA subsidies ahead of the US mid-term elections.

• Tight Labor: A falling breakeven employment rate and rising household inflation expectations.

Investment Implications

• Stock-Bond Correlation: Inflationary shocks are making stocks and bonds move in the same direction, reducing the efficacy of traditional 60/40 portfolios.
• Gold’s Role: Gold is increasingly viewed as a left-tail hedge and a “hard money” alternative as sovereign debt levels (reaching 30% of the $340T global sector debt) raise debasement fears.

 The gold market is likely to “pause” after the January surge, but the combination of fiscal expansion and Fed leadership uncertainty suggests investment demand will remain a structural feature of 2026.

source :WGC