By The gold market’s historic surge came to an abrupt halt Thursday, with spot prices retreating 2.3% from their all-time peak of 2,450/oz to settle 2,380. This pullback has ignited fierce debate among analysts: Is this a brief consolidation before the next leg higher, or the beginning of a deeper correction in the precious metals complex?
The Bull Case: Why the Rally Could Resume
- Persistent Inflation Pressures
- The latest CPI reading of 3.4% year-over-year confirms inflation remains stubbornly above the Fed’s 2% target
- Real yields (adjusted for inflation) continue to hover near historic lows, preserving gold’s appeal
- Commodity Research Bureau index shows broad-based input cost increases across industries
- Unabated Central Bank Demand
- Official sector purchases grew 12% year-over-year in Q1 2025
- China’s central bank added 21 tonnes to reserves in March alone
- Emerging markets continue diversifying away from USD-denominated assets
- Election Year Uncertainty
- Historical data shows gold averages 8% gains in U.S. election years
- Trump/Biden policy divergence on tariffs, Fed appointments creates hedging demand
- Geopolitical tensions, particularly concerning Taiwan and Ukraine, continue to run high no matter how current events unfold
The Bear Case: Potential for Further Weakness
- Delayed Fed Pivot
- Fed funds futures now price first rate cut for December vs September previously
- Strong labor data (unemployment at 3.8%) gives Fed room to maintain restrictive policy
- Cleveland Fed’s inflation nowcast suggests limited near-term disinflation
- Resurgent Dollar Strength
- DXY index rebounded 1.2% this week as ECB signals dovish turn
- Yield differentials favor USD as other central banks cut rates faster than Fed
- Bets on the U.S. dollar rising, reflected in long positions in futures markets, have reached their highest level in 18 months
- Geopolitical Risk Premium Fades
- Middle East tensions show signs of de-escalation
- Russia-Ukraine grain corridor negotiations progressing
- Trump’s more moderate tone toward China has eased short-term concerns about a potential trade war
Technical Landscape: Key Levels to Watch
- Support Zones
- $2,350 (100-day moving average & previous resistance)
- $2,300 (psychological level & 38.2% Fibonacci retracement)
- $2,250 (200-day MA & institutional buy zone)
- Resistance Levels
- $2,450 (record high & options barrier)
- $2,500 (next psychological milestone)
- $2,550 (long-term measured move target)
- Momentum Indicators
- RSI cooled from overbought 78 to neutral 62
- MACD histogram shows slowing upward momentum
- Trading volumes 28% above 30-day average during decline
What History Tells Us
An analysis of gold’s 15 major pullbacks after record highs since 2000 reveals:
- 11 instances saw prices recover to new highs within 3 months
- Average correction depth: 5.2%
- Longest recovery period: 11 months (2011-2012)
- Shallowest rebound: 2.1% drop before resuming uptrend
Expert Consensus
“The 2,350 level is make−or−break ” says Goldman Sachs metals strategist Mikhail Sprogis. “Hold above it, and this is a healthy consolidation. Break below, and we could see a test of 2,200 before the next sustainable rally.”
Meanwhile, Bank of America’s technical team notes: “The weekly chart remains firmly bullish. We’d need to see consecutive closes below $2,300 to invalidate the uptrend.”
As traders await Friday’s PCE inflation data—the Fed’s preferred gauge—the gold market remains at a critical inflection point that could determine its trajectory through election season.