Analysts say gold’s pullback has not shaken its structural support, with central bank demand and macro fundamentals still underpinning the medium-term outlook. The note this is all from (in summary) is from earlier this week. Gold has since dropped more but the points made are still well worth reading.
Summary:
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Analysts argue the latest pullback in gold does not signal a shift in the broader bullish macro backdrop.
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Safe-haven demand, central bank buying and real-rate dynamics remain supportive over the medium term.
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Central bank accumulation since 2022 continues to underpin gold’s multi-year uptrend.
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Official-sector demand is seen as largely price-insensitive and likely to re-emerge after the recent correction (and margin hikes!).
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Near-term price moves are expected to stay volatile, driven by macro data, policy expectations and the US dollar.
The recent correction in gold prices has not altered the underlying fundamentals supporting the metal, analysts say, arguing that the broader macro narrative remains firmly constructive despite near-term volatility.
According to analysis from ING, the pullback appears more reflective of short-term positioning and shifting macro drivers than any deterioration in gold’s structural outlook. Safe-haven demand, continued central bank accumulation and the trajectory of real interest rates are all seen as key pillars supporting prices over the medium term.
Analysts point out that while shorter-term factors helped fuel the most recent rally, the foundation of gold’s multi-year uptrend has been laid by sustained buying from the official sector. That trend gained momentum in 2022 following Russia’s invasion of Ukraine, which prompted many central banks to reassess reserve security and diversify away from traditional assets. Since then, central bank demand has acted as a stabilising force in the gold market, absorbing supply and anchoring longer-term sentiment.
Although official-sector purchases eased modestly last year, central banks remain significant net buyers overall. At current price levels, and following the recent correction, analysts expect central bank demand to become more active again. Such buying is typically strategic and long-term in nature, and largely insensitive to short-term price fluctuations, reinforcing gold’s role as a reserve asset and providing structural support beneath the market.
That said, analysts caution that the path forward is unlikely to be smooth. In the near term, gold prices are expected to remain sensitive to incoming macroeconomic data, shifting monetary policy expectations and movements in the US dollar, rather than simply extending the rally in a straight line.
This article was written by Eamonn Sheridan at investinglive.com.