Gold traders have had a hard time getting this year right. The metal has swung from record highs to steep drops and back again. Most of the people who trade it are still trying to figure out which move to trust.

A shift in Federal Reserve expectations, paired with a fresh round of buying, is now pushing the rally question back to the front of the room. Whether it holds depends on a handful of signals that are worth walking through one by one.

Gold’s 2026 swings set up a pivotal week

Gold hit an all-time high of approximately $5,589 an ounce on January 28, then fell more than 18% from that record. Despite the pullback, the metal is still well above its 52-week low.

Gold posted its best week since January, gaining more than 7% as weaker-than-expected jobs data and tamer inflation readings reduced expectations for September’s Federal Reserve rate hike. Gold stocks had already been trading at an elevated level. Both data points accelerated the rally, according to CNBC.

Related: Bank of America’s latest gold outlook sends a different signal

“Gold is the new gold,” Pippa Malmgren, a former Special Assistant to President George W. Bush and member of the National Economic Council, told CNBC.

What draws people into gold hasn’t changed much in her view: worry over U.S. fiscal spending running loose, and weak growth almost everywhere else, which she thinks points toward more inflation.

Central bank buying keeps the floor under prices

Central banks haven’t stopped adding to their gold reserves, and China is leading that charge. Something Malmgren reads as a sign that faith in fiat currency keeps eroding.

“The PBOC added 19.9 tons in July, its largest month since late 2023 and its 21st straight month of accumulation,” said Patrick Kennedy, who founded the Hartford, Connecticut firm AllSource Investment Management, according to Caixin Global. China’s streak has stretched well beyond a year at this point.

John Paulson, the billionaire hedge fund manager who has bet on gold for more than a decade, thinks the metal is still only in the early innings of a longer rally. He points to fading trust in paper currency and government spending that shows no sign of slowing, according to CNBC.

Goldman Sachs is leaning on much the same logic. The bank expects central banks to keep purchasing roughly 60 tonnes of gold monthly through 2026 as reserve managers diversify from the dollar.

That’s a real reversal from earlier this year, when higher rate expectations pushed billions of dollars out of gold ETFs before those outflows finally started to slow.

Gold traders have had a hard time getting this year right.

Anadolu/Getty Images

Fed rate expectations are shifting quickly

Odds of a Fed rate hike have dropped fast. Traders are now pricing in about a 40% chance of a September hike, down from a higher level before the newest inflation numbers came out, based on the CME Group’s FedWatch tool, according to CNBC. Lower hike odds, paired with a weaker dollar, usually work in gold’s favor by reducing the opportunity cost of holding non-yielding metal.

Nick Cawley, an analyst who contributes work for the UK bullion dealer Solomon Global, said the odds of a Federal Reserve rate hike were already sliding sharply before the inflation data were released.

Kennedy cautioned against reading too much into that shift. The Fed held rates steady all year, he pointed out. And Wednesday’s CPI print came in roughly where economists expected, with both headline and core inflation running close to forecasts.

New Fed Chair Kevin Warsh is adding his own wrinkle to the picture. Eugenia Mykuliak of B2Prime Group described his early messaging as “cautious and often ambiguous,” saying the uncertainty has pushed some money out of stocks and, in turn, into gold.

At the Fed’s July 29 meeting, policymakers held rates steady even though three officials wanted a hike instead, as CNBC reported. This isn’t the first time precious metals have swung sharply in response to market interpretation of Warsh’s policy stance.

Miners and ETFs give investors more ways to play the trade

Some traders are hunting for value in gold mining stocks rather than the metal itself. Vince Stanzione, an independent trader who wrote “The Millionaire Dropout,” pointed to AngloGold Ashanti and S&P 500 member Newmont as examples trading at single-digit forward earnings multiples while still paying decent dividends.

Retail investors typically reach for equity-focused funds like VanEck Gold Miners and VanEck Junior Gold Miners, or bullion-focused ETFs such as SPDR Gold Shares and iShares Gold Trust when they want more direct exposure to price moves.

Bank of America has favored larger producers in the sector, noting bigger producers like Newmont among its preferred names rather than smaller miners when prices pull back.

Miners also carry more leverage than the metal itself. When gold prices rise while mining costs stay flat, profit margins can grow faster than gold itself. Which is one reason why Kennedy treats miner funds as a satellite bet rather than something to build a portfolio around. Silver has ridden the same wave, just logging its best week since February.

Related: Top European bank has a message for investors on gold price