Gold has just rebounded from around $3,717/oz after a healthy correction, following a strong rally that pushed prices toward a new high near $3,790/oz.
This pullback mainly reflects profit-taking after the extended uptrend and growing investor caution as the balance of U.S. macro data this week tilted toward “moderately positive”:
New Home Sales came in at 800K (well above the 650K forecast and higher than the previous 664K), while Q2 GDP was revised up to 3.8%, indicating stronger-than-expected growth. These figures helped strengthen the USD and cooled safe-haven flows, creating near-term resistance for gold, even though Treasury yields only edged up slightly, and the geopolitical backdrop remains complex.
The next focal point is Core PCE—the Fed’s preferred inflation gauge. Inflation alone can exert opposing forces on gold. If PCE eases further, expectations of monetary easing would be reinforced, real yields would trend lower, and in principle, this would be supportive for gold. Conversely, if inflation cools while growth remains solid, capital may rotate toward risk assets (equities, credit), reducing safe-haven demand in the short term and putting deeper corrective pressure on gold.
Should PCE surprise on the upside, a hawkish repricing could push USD and real yields higher, weighing on gold. However, ongoing geopolitical uncertainty and strategic buying interest could limit the downside.
On the structural front, two key forces reduce gold’s sensitivity to short-term capital flows. First, net central bank purchases, which are strategic in nature (diversifying reserves, reducing USD exposure, hedging sanctions risk) and less affected by market noise.
Second, ETF inflows have shown signs of returning after the subdued 2022–2023 period; while not linear, recent months have been mostly positive, absorbing secondary supply as derivatives markets fluctuate.
On the supply side, slower global mine growth, rising marginal costs, and long investment cycles mean low supply elasticity—explaining why corrections more often form consolidation zones rather than full reversals when underlying demand persists.
Geopolitics remains a key catalyst: unresolved tensions in Gaza, rising NATO–Russia frictions raising miscalculation risks, and the possibility of renewed trade disputes in an election cycle all help keep global risk premia elevated. These “hotspots” make it difficult for institutional investors to materially lower defensive allocations, underpinning gold even when macro data temporarily favors risk assets.
Overall, gold retains a clearly positive medium-term outlook despite the likelihood of short-term corrections driven by data surprises. Having set an impressive high near $3,790, the metal is now in a rebalancing phase.
In this environment, a cautious approach is warranted—favouring buying on controlled pullbacks rather than chasing breakouts—to manage volatility while aligning with the structural drivers that continue to support gold.
By Linh Tran, Market Analyst at XS.com