Gold is 26% below its record: why the "safe" asset fell

"Gold never gets cheaper" — you have probably heard it many times. 2026 put that to the test. As of October 20, an ounce of gold (≈31.1 grams) costs about $4,120 (Reuters) — 26% below its January record.

Three questions: what happened, why, and what we can learn from it.

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What happened

• January 29 — gold set an all-time intraday record of ~$5,595 an ounce (Seoul Economic Daily).
• January 30 — it fell ~9% in a single day. According to Reuters, it was the steepest daily drop since 1983 (Reuters). The trigger: the US president's announcement of Kevin Warsh as his pick for Fed chair and a sharp rally in the dollar (Morningstar).
• The months after — the decline continued with swings. A year ago gold futures were ~$4,359; now ~$4,145: −5% over the year.

Why: gold pays nothing

A gold bar pays you no dividend and no rent — its value is only its price. That is why large investors always compare gold with the alternatives.

In 2026 those alternatives got stronger:

• On September 16 the Fed raised rates to a 3.75–4.00% target range (our inflation article);
• The 10-year US Treasury yield was 5.09–5.21% on October 13–16 (Fed H.15).

When income-paying assets offer more than 5%, holding gold that "pays nothing" becomes more expensive for big funds — they sell, and the price falls. (Interest is impermissible in the view of many Islamic scholars. This only explains how the market works; bonds are not being recommended.)

The paradox: risk went up, gold did not

Gold usually rises as a "safe haven" in times of war and uncertainty. Yet over the year:

• oil rose ~80% on Middle East risk (our oil article);
• gold fell ~5%.

One more striking fact: according to Goldman Sachs, central banks bought an average of ~91 tons of gold a month over the past three months — versus 17 tons a month before 2022. A big buyer was there, and the price still fell: prices are set not by one buyer but by the whole market.

The lesson

• "Safe" does not mean "never falls". Gold may hold value over the long run, but it can also fall deeply for months — 2026 showed it.
• A record is not a guarantee. At the top, everyone says "it only goes up from here"; that very day can come right before one of the worst.
• Price depends on the alternatives. Even if an asset itself does not change, its price changes when other opportunities do.

Also keep in mind: Islamic law sets specific conditions for trading gold and silver (such as hand-to-hand exchange). Ask scholars which forms of investing in gold are permissible.

What to watch

• October 27–28 — the Fed meeting: the rate decision feeds directly into gold;
• Treasury yields — if they fall back below 5%, the pressure on gold may ease.

For information only — neither investment advice nor a fatwa. Figures refer to the stated dates; check the sources for current values.