Published on: 2026-02-12
Gold has started 2026 the way it ended 2025: climbing higher, breaking records, and reacting sharply to headlines that would have barely registered a year ago. What began as a dispute over Arctic security and Greenland quickly evolved into a broader test of trade relationships, alliance stability, and the framework that has governed global commerce for decades. For traders watching XAUUSD, the metal priced in US dollars on platforms like EBC's, this environment has created both opportunity and complexity. Gold touched levels above $5,400 per ounce in late January before pulling back sharply, illustrating the kind of two-way volatility that defines the current market.
The following is a retrospective description of market psychology around historical price levels, intended to illustrate the complexity of gold trading. It should not be construed as a judgment regarding future support or resistance levels.
The Greenland issue emerged suddenly in mid-January 2026 when President Trump announced plans to impose a 10% tariff on Denmark and seven other European nations, including the UK, Norway, Sweden, France, Germany, the Netherlands, and Finland, effective 1 February. The stated aim was to pressure Denmark into negotiating the sale of Greenland to the United States, with tariffs escalating to 25% by 1 June if no agreement materialised. These countries, all founding or long-standing NATO members, found themselves caught between security partnerships and economic coercion.
Within days, the situation intensified. European troops began arriving in Greenland in a show of solidarity, and Sweden dispatched military officers to assist Denmark in planning joint security exercises. What might have remained a bilateral disagreement instead drew in a wider circle of allies, raising fundamental questions about the predictability of trade policy and the stability of longstanding partnerships.
By 21 January, the situation shifted. Following talks with NATO leadership, the US administration announced it had reached a "framework of a future deal" on Greenland and would not proceed with the threatened tariffs. Whilst the immediate crisis eased, the episode left a residue of uncertainty across markets. Traders began pricing in the possibility that tariffs could be deployed not just as economic tools, but as instruments of geopolitical leverage, even against close allies.
For someone trading CFDs in Jakarta, Lagos, or London, a dispute over Greenland might seem distant. But the implications ripple outward in ways that directly affect trading conditions. When major economies threaten one another with tariffs over territorial ambitions, it signals a shift away from rules-based trade towards a more transactional, unpredictable system. That kind of environment raises the cost of doing business, slows cross-border investment, and injects fear into planning cycles. Companies delay expansion. Central banks reassess reserve strategies. Investors move capital into assets that are less dependent on political goodwill.
Gold benefits from this uncertainty because it sits outside the traditional financial system. It is not a liability of any government, does not require a functioning banking system to hold value, and cannot be frozen by executive order in the way that foreign currency reserves can be. When the rules of the game feel less stable, gold becomes a hedge not just against inflation or currency debasement, but against the risk that the game itself might change mid-play.
The price action in January 2026 captured the tension perfectly. Gold opened the month around $4,430 per ounce and climbed steadily through mid-month as the Greenland dispute escalated. By 20 January, prices had reached $4,763, and the rally accelerated further after the initial tariff threats were announced. On 28 January, gold touched an intraday high near $5,400, an all-time record. But the euphoria was short-lived. By 30 January, prices had reversed sharply to close around $4,865, a drop of more than $500 in two sessions.
This was not a gradual correction driven by changing fundamentals. It was a violent flush of leveraged positions, triggered by a strengthening US dollar and rising real yields. When everyone in the market is positioned the same way, leaning heavily into gold as a safe haven, even a minor shift in sentiment can cascade into forced selling. Margin calls accelerate the move, and what starts as profit-taking turns into a scramble for liquidity.
For traders, this illustrates a critical point. Geopolitics can ignite a rally, but macro variables like the dollar and real interest rates determine whether that rally holds or collapses. Gold is sensitive to both, and when they move in opposing directions, price action becomes choppy and unpredictable.
Despite the volatility, gold has not been abandoned. In fact, the underlying demand structure remains remarkably firm. Gold-backed exchange-traded funds attracted record inflows of $89 billion in 2025, more than eight times the total recorded in 2024. January 2026 continued the trend, with $19 billion flowing into gold ETFs, the strongest single month on record. These are not speculative inflows chasing momentum. They represent institutional and retail investors building long-term positions in a metal they view as essential portfolio insurance.
Central banks have played an equally important role. Through the first eleven months of 2025, central banks purchased an estimated 634 tonnes of gold, with the third quarter alone accounting for 220 tonnes, a 10% increase year-on-year and a 28% jump from the prior quarter. Notably, this buying occurred despite gold prices reaching record highs, a signal that official sector demand is driven by strategic concerns rather than price sensitivity.
World Gold Council surveys reveal the mindset behind this behaviour. An overwhelming 95% of surveyed central banks expect global gold reserves to increase over the next twelve months, and 43% anticipate expanding their own holdings. The drivers are clear: diversification away from the US dollar, concerns about sanctions risk, and a desire to hold assets that cannot be frozen or manipulated by foreign governments.
There is a precedent for this kind of strategic thinking. In 1933, during the depths of the Great Depression, President Franklin D. Roosevelt signed Executive Order 6102, which prohibited the hoarding of gold coin, bullion, and certificates. Americans were required to deliver their gold holdings to the Federal Reserve by 1 May 1933 in exchange for $20.67 per troy ounce, with penalties of up to $10,000 in fines or ten years in prison for non-compliance. The order remained in effect for over four decades. It was not until legislation passed in 1974 that Americans regained the legal right to own gold.
The purpose here is not to suggest history is repeating, but to highlight a pattern that persists. Governments treat gold differently from other assets. They view it as strategic money, capable of shoring up confidence, backing currency, and providing liquidity in moments of crisis when traditional financial systems are under strain. Markets have not forgotten this. When central banks accumulate gold aggressively, even at elevated prices, it sends a message: they believe the global financial system faces structural risks that gold can mitigate.
Greenland is not the only source of geopolitical tension supporting gold. The Middle East remains a persistent concern, particularly around critical shipping chokepoints. On 3 February 2026, a US fighter jet shot down an Iranian drone that aggressively approached the USS Abraham Lincoln aircraft carrier in the Arabian Sea. Hours later, two Iranian gunboats and a drone harassed a US-flagged chemical tanker transiting the Strait of Hormuz, threatening to board and seize the vessel. Whilst the immediate incidents were contained, they underscore how quickly tensions can flare in a region responsible for a significant share of global energy flows.
For gold, these episodes matter because they inject volatility into the energy complex, and energy volatility tends to spill over into broader risk sentiment. When traders worry about supply disruptions or military escalation, gold absorbs the fear premium. It acts as a hedge not just for those directly exposed to energy markets, but for anyone seeking protection from the systemic risks that energy shocks can trigger.
The Russia-Ukraine conflict continues to operate as a background influence. Whilst battlefield developments no longer dominate headlines, the financial dimensions remain highly relevant. The freezing of approximately $322 billion in Russian sovereign reserves has fundamentally altered how governments and institutional investors view dollar-denominated assets. When reserves can be frozen at will, the appeal of holding a neutral, physical asset like gold increases, especially for countries that fear becoming targets of future sanctions.
Russia itself has reportedly begun selling portions of its strategic gold reserves to offset budget shortfalls and support the weakening rouble. Former Ukrainian central bank governor Kyrylo Shevchenko estimated that Moscow could sell up to $30 billionworth of gold in 2025, with a further $15 billion possible in 2026. These are not trivial amounts, but the fact that Russia views its gold as a liquid, sanctions-resistant asset highlights the metal's unique role in a fragmented financial landscape.
Traders looking for structure in this environment need reference points. These are not forecasts or targets, but zones where price behaviour is likely to shift based on sentiment, positioning, and macro conditions.
Around $5,000 per ounce acts as a psychological anchor. The market has tested this level multiple times in recent weeks, and it has served as both resistance and support. A sustained break above $5,000 with strong volume tends to draw in momentum buyers. A failure to hold typically triggers profit-taking and a reassessment of stretched positioning.
Between $4,700 and $4,900, the market enters a consolidation zone where geopolitical concerns remain elevated but immediate panic has faded. This is where dip-buying typically emerges, as longer-term holders view pullbacks as opportunities to add exposure. Trading in this range suggests that the structural demand from central banks and ETFs is still intact, even if speculative interest has cooled.
The $4,400 to $4,650 range represents a stress zone. Reaching these levels usually requires a combination of US dollar strength, rising real yields, and disorderly selling as leveraged positions unwind. If gold spends time here, it signals that macro factors are overwhelming the geopolitical support, and the market is repricing the cost of holding a non-yielding asset in a higher-rate environment.
On the upside, the $5,300 to $5,600 zone came into view briefly in late January. Holding these levels requires either a significant escalation in geopolitical risk or a clear easing in financial conditions, such as renewed US Federal Reserve rate cuts or a weaker dollar. Bank forecasts, including one from OCBC projecting $5,600 by the end of 2026, assume that central bank buying and ETF inflows remain robust whilst real yields decline.
Two developments would challenge the case for sustained gold strength. The first is a credible off-ramp from current geopolitical tensions. If the Greenland issue is genuinely resolved and tariff threats recede across the board, the safe-haven bid could thin out quickly. Markets would need to see follow-through, not just rhetoric, but a clear de-escalation would remove one of the key pillars supporting current price levels.
The second risk is a macro squeeze. If the US dollar strengthens significantly whilst real yields rise, gold faces headwinds regardless of geopolitics. Higher real yields increase the opportunity cost of holding gold, and a stronger dollar makes the metal more expensive for non-US buyers, dampening demand. In this scenario, even central bank buying might not be enough to prevent a correction, particularly if speculative positioning remains elevated.
The sequencing matters. If geopolitics stays tense but macro conditions tighten, gold can wobble first and recover later. If macro stays supportive but geopolitics worsens, gold tends to hold firmer through pullbacks. Understanding which force is dominant at any given moment is critical for managing risk.
Several indicators can help gauge where the market is headed. Greenland-related headlines remain relevant, but actions matter more than words. Are tariffs being implemented, or are negotiations progressing? Is the rhetoric escalating or cooling? These signal whether the safe-haven demand will persist.
Signs of retaliation from affected countries could widen trade tensions into a broader loop, increasing systemic risk and supporting gold. Conversely, any movement towards trade agreements or de-escalation would likely pressure prices.
The US dollar and real yields moving higher together represent the clearest stress signal for gold. This combination makes holding gold expensive and reduces its relative attractiveness compared to interest-bearing assets. Monitoring US Treasury yields, inflation expectations, and Federal Reserve commentary provides insight into this dynamic.
Dip-buying behaviour offers clues about underlying conviction. Are pullbacks being absorbed quickly by fresh buying, or do they turn into multi-session selloffs driven by forced liquidation? Strong hands tend to buy dips. Weak hands tend to chase priceand exit in panic.
Updates on official-sector buying and ETF flows remain essential. If central banks continue accumulating gold even on pullbacks, it signals confidence in the structural case. If ETF outflows begin to exceed inflows, it suggests retail and institutional conviction is weakening.
Finally, any fresh pressure on global growth expectations that turns trade risk into a broader confidence shock would likely support gold. Tariffs that reduce growth, disrupt supply chains, and erode business confidence create the kind of stagflationary environment where gold historically performs well.
On EBC's platform, XAUUSD is quoted as gold priced in US dollars per ounce. In calmer periods, it behaves as a slow-moving hedge tied to inflation expectations, interest rates, and the dollar. But in trade shocks or geopolitical flare-ups, it trades more like liquid protection. Demand can stay firm even as prices rise, driven by fear rather than value. But that same dynamic means it can unwind quickly when the dollar strengthens and real yields climb, forcing leveraged positions to close and exposing the fragility of crowded trades.
The base case for the next three to six months is not a smooth ride higher. It is a period of messy, two-way volatility, where headlines can push price into the next zone quickly, but positioning and macro conditions decide how long it stays there. Greenland may have been the spark, but the fuel underneath—central bank buying, record ETF inflows, sanctions risk, and alliance fragility—is what keeps the flame burning.
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Disclaimer & Citation
Disclaimer: This material is for information only and does not constitute a recommendation or advice from EBC Financial Group and all its entities ("EBC"). Trading Forex and Contracts for Difference (CFDs) on margin carries a high level of risk and may not be suitable for all investors. Losses can exceed your deposits. Before trading, you should carefully consider your trading objectives, level of experience, and risk appetite, and consult an independent financial advisor if necessary. Statistics or past investment performance are not a guarantee of future performance. EBC is not liable for any damages arising from reliance on this information.
