Category: Commodity market

• Gold’s recent pullback appears more like a healthy normalization than a sign of underlying weakness.
• Its outsized outperformance versus equities had become increasingly difficult to maintain.
• For investors, the key issue now is whether the correction has brought valuations back to more attractive levels.

Gold prices have recently taken many investors by surprise. After a powerful rally earlier this year, much of the optimism surrounding the metal has faded. Since the start of the year, gold has declined by roughly 5.6% — despite an environment marked by geopolitical tensions, persistent inflation concerns, and renewed demand for defensive assets.

Under normal circumstances, these conditions would strongly support higher gold prices. This time, however, the market has behaved differently. Gold has retreated while equities have regained momentum, leaving investors wondering whether the earlier rally simply became excessive.

In the short term, the answer appears to be yes.

Gold had significantly outperformed equities, reaching relative strength levels not seen in nearly two decades. When such a gap becomes too extreme, markets often respond in a familiar way: the trend reverses — rapidly, sharply, and with little warning.

The recent decline does not necessarily suggest that gold itself has become fundamentally weak. Rather, it may indicate that the metal had previously become too strong relative to other asset classes.

At first glance, the pullback seems difficult to explain. Ongoing geopolitical risks, inflation pressures, and broader uncertainty would typically favor safe-haven assets like gold. Yet markets are not driven solely by fundamentals; they also depend heavily on expectations and positioning.

And that is where the issue emerged.

Gold had become exceptionally stretched relative to the S&P 500. Investors comparing gold against U.S. equities could clearly see that the performance gap had widened to historically unusual levels — a divergence that became increasingly difficult for markets to ignore.

A review of the rolling one-year relative performance between gold and the S&P 500 since 2006 makes the relationship especially clear. Whenever gold sits above equities, the precious metal has outperformed over the previous twelve months. When it falls below, stocks have delivered stronger returns.

Over this period, gold outperformed the S&P 500 by an average of 3.1 percentage points across rolling 12-month windows and led equities in roughly 56% of those periods. On the surface, that appears impressive. Yet the more important detail lies beneath the averages.

The advantage was relatively modest, while the swings were extremely large.

The standard deviation of gold’s relative performance reached around 24 percentage points. In practical terms, that means gold can outperform stocks by more than 27 percentage points in a year — or underperform by roughly 21 percentage points — and both outcomes would still fall within historical norms.

This is where many investors misjudge the gold market. Gold does not steadily and consistently outperform equities. Instead, it moves in cycles. There are periods when it dramatically outshines stocks, and others when it underwhelms for years at a time.

Gold vs. Stocks: Where Investors Often Miscalculate

Many investors treat gold as a permanent hedge against every form of uncertainty. Economic crisis? Buy gold. Inflation? Buy gold. Geopolitical risk? Buy gold. But markets rarely work in such a straightforward way.

Gold tends to perform best when confidence in risk assets weakens. During the 2008–2009 financial crisis, for example, the metal benefited as investors sought safety while equity markets struggled.

The environment between 2013 and 2019 looked very different. During those years, equities significantly outperformed while gold delivered relatively disappointing returns for an extended period.

This highlights an important point: gold is not a guaranteed return enhancer. It is a cyclical asset. And that cyclical nature is exactly what gives it value within a diversified portfolio.

Gold’s greatest strength is not necessarily its ability to beat stocks over time, but rather the fact that it often behaves differently from them. Since 2006, the correlation between monthly gold returns and the S&P 500 has been only around 0.07, suggesting that the two asset classes move largely independently.

Gold’s Extreme Lead Became a Warning Sign

The divergence became particularly pronounced around the turn of 2025/26, when gold’s outperformance relative to the S&P 500 surged to roughly 69 percentage points — the largest gap seen in about two decades.

That level no longer represented a normal market move. It reflected an extreme.

Gold was approaching the upper three-sigma threshold near 75 percentage points, implying that the metal had become historically overstretched relative to equities. It was no longer simply expensive or overheated; it had entered territory where caution became increasingly necessary.

The correction that followed was therefore not entirely surprising.

Since its peak, gold has fallen by roughly 23%, while the S&P 500 gained around 6% over the same period. Much of gold’s extraordinary lead disappeared rapidly — a classic example of mean reversion in financial markets.

For investors, the lesson is important. Once an asset has rallied excessively, a compelling long-term narrative alone is no longer enough to sustain prices indefinitely. At some stage, optimism becomes overly priced in, and markets begin to rotate toward relatively more attractive opportunities elsewhere.

Gold Is Moving Back Toward Historical Norms

At present, gold’s 12-month outperformance versus the S&P 500 has narrowed to roughly 6 percentage points, much closer to the long-term average of 3.1 percentage points.

Very little remains of the extreme divergence seen earlier in the year. The previous overextension has already been substantially corrected — and far more quickly than many investors anticipated.

That is what makes the current environment particularly interesting. Investors focusing only on the recent decline may conclude that gold has suddenly turned weak. In reality, the market may simply be witnessing a normalization after an unusually powerful rally.

Gold’s Long-Term Case Remains Intact

Despite the recent correction, gold’s long-term performance remains stronger than many assume. Since 2006, gold prices have risen by approximately 616%, compared with roughly 470% for the S&P 500 on a price-only basis.

However, this comparison requires context. Dividends are excluded from the S&P 500 figure, and over nearly two decades dividend reinvestment makes a substantial difference.

On a total-return basis, including dividends, equities still hold a slight advantage. That is why it would be misleading to declare gold the definitive long-term winner.

Stocks possess structural advantages that gold lacks. Companies generate earnings, expand operations, reinvest capital, buy back shares, and distribute dividends. Gold does none of these things. Its value is driven primarily by scarcity, investor confidence, and supply-demand dynamics.

That is also why gold should not be viewed as a replacement for equities, but rather as a complement to them within a broader portfolio strategy.

Why Gold Still Deserves Attention

In the near term, gold could continue losing relative ground to equities after its exceptional outperformance. Over the next six to twelve months, there are reasonable arguments that stocks may continue to narrow the gap further.

Yet the long-term structural backdrop for gold remains supportive.

One major factor is central bank demand. Around the world, central banks continue diversifying reserves away from U.S. Treasury assets, with gold playing a central role in that process. Unlike sovereign debt, gold is politically neutral, finite in supply, and globally recognized as a store of value.

Importantly, this is not a short-term trend. Reserve allocation shifts typically unfold over many years, creating a persistent structural source of demand for the precious metal.

Geopolitical uncertainty, inflation concerns, and broader questions surrounding long-term currency stability also continue to support gold’s strategic relevance within portfolios.

Still, valuation matters.

Investors buying after an extended rally often need considerable patience. Those evaluating gold after a meaningful correction may once again find a more balanced risk-reward setup. That is precisely why the current phase in the gold market deserves closer attention.

• Gold extends losses for a third consecutive session as renewed escalation in the Iran conflict strengthens the USD.
• Rising inflation concerns have reinforced expectations of further Fed rate hikes, providing additional support to the greenback and putting pressure on the precious metal.
• Market participants are now awaiting the US preliminary Q1 GDP data and the closely watched US PCE Price Index for fresh trading direction.

Gold (XAU/USD) remains under heavy selling pressure heading into the European session, hovering near a two-month low touched earlier on Thursday. The precious metal also appears vulnerable to extending its decline below the $4,400 level and the technically important 200-day Simple Moving Average (SMA), as renewed escalation in Middle East tensions boosts demand for the safe-haven US Dollar (USD). At the same time, expectations that major central banks could maintain a more hawkish policy stance to combat rising inflation continue to weigh on the non-yielding bullion.

According to Reuters, a US official stated that American forces launched fresh strikes in Iran on Wednesday, targeting a military facility viewed as a threat to US troops and commercial shipping in the Strait of Hormuz. The official added that US forces also intercepted and destroyed several Iranian drones posing similar risks. Meanwhile, US President Donald Trump said he was dissatisfied with the terms negotiated with Iran and would not rush into a deal, reducing optimism for a diplomatic resolution to the three-month-long conflict. Ongoing disagreements between Washington and Tehran over Iran’s nuclear program and security in the Strait of Hormuz continue to support geopolitical risk sentiment, benefiting the Greenback and pressuring Gold prices.

In addition, recent developments have helped Crude Oil prices recover modestly from a more than three-week low reached on Thursday, fueling concerns over energy-driven inflation and reinforcing expectations for further rate hikes. According to the CME Group FedWatch Tool, markets are now pricing in nearly a 50% probability that the US Federal Reserve (Fed) could raise interest rates by 25 basis points before the end of the year, while the likelihood of another hike in January 2027 stands at around 60%. Hawkish remarks from several influential FOMC officials have further pushed US Treasury yields higher, offering additional support to the USD and adding downside pressure on non-yielding Gold.

Looking ahead, investors will closely monitor key US economic releases, including the preliminary Q1 GDP report and the Personal Consumption Expenditures (PCE) Price Index. The PCE report, regarded as the Fed’s preferred measure of inflation, is expected to play a crucial role in shaping expectations for the future path of US interest rates. This, in turn, could drive fresh USD demand during the North American session. At the same time, ongoing geopolitical headlines are likely to keep volatility elevated across global markets and continue influencing Gold price movements.

Gold Daily Chart

Gold sellers remain in control after price slipped below the key 200-day SMA support. From a technical standpoint, XAU/USD continues to trade with a bearish bias within a descending channel and beneath the 500-day SMA. In addition, the Relative Strength Index (RSI) remains close to 35, signaling weak buying interest, while the Moving Average Convergence Divergence (MACD) stays in negative territory, reinforcing the prevailing downside momentum.

The metal is now approaching support at the lower edge of the descending channel around $4,311.11, following the confirmed break beneath the crucial 200-day SMA. If prices fall decisively below this channel support, it could trigger a deeper correction within the broader bearish structure. On the upside, any rebound is likely to face immediate resistance near the $4,480 horizontal barrier. A move above that level could shift focus toward the descending channel ceiling and the confluence resistance formed by the 50-day SMA around $4,625–$4,630, which may act as a stronger selling area.

Several years ago, I projected that gold’s assault on the world’s fiat currencies would likely pause around April 2026. That slowdown actually began in February. While the global currency queen still has many more victories ahead against fiat money, the market’s current phase is one of consolidation — and that’s a healthy development.

The long-term chart comparing failed fiat currencies to gold tells the real story. It’s essential for gold investors to keep their attention on the broader picture and recognize that gold is not some speculative “hot stock.”

Gold is the world’s ultimate currency, and investors should focus on steadily and patiently accumulating more of it over time.

A look at the daily gold chart shows a few encouraging “green shoots,” including a potential double bottom forming in the Stochastics (14,7,7) indicator.

However, leveraged futures traders remain concerned that the ongoing turmoil around the Strait of Hormuz could persist, potentially pushing oil prices — and in turn interest rates — higher.

Since these traders heavily influence short-term market movements, their concerns continue to weigh on gold’s near-term price action.

The US government had hoped for a swift resolution to the war in Ukraine, but that outcome has yet to materialize. In response to the prolonged conflict, the Russian central bank has increasingly turned to gold sales to help finance the ongoing strain and instability.

Notice the weak, “wet noodle” behavior of the key 14,5,5 Stochastics oscillator.

That kind of sluggish momentum appears consistent with the idea of continued central bank gold selling from Russia — and possibly Turkey and others as well.

The war in Ukraine created significant disruption across global markets, and the conflict involving Iran could generate even greater turbulence.

Oil shortages are already emerging in parts of Asia and are expected to reach Europe within weeks. To cushion the impact, the US government has been drawing down and effectively “exporting” oil from the Strategic Petroleum Reserve (SPR). However, if the Strait of Hormuz crisis continues, that supply may soon be needed domestically.

In short, gold futures traders increasingly believe the Iran conflict could lead to prolonged inflationary pressure and higher interest rates — though likely not to the extreme levels seen during the 1970s.

That also means many traders continue to view higher interest rates as a negative factor for gold.

As for gold investor morale, the BPGDM sentiment index — while technical in nature — has historically done a solid job of reflecting overall sentiment within the gold market.

Periods of weak confidence typically occur when the BPGDM falls below the 50 level, which is exactly where it sits now. Interestingly, those same periods have often presented some of the best buying opportunities for long-term investors.

In short, the market may still need a bit more consolidation before gold, silver, and mining stocks begin their next major move higher against fiat currencies. However, investors accumulating positions during the current weakness are likely to be rewarded over the longer term.

The US stock market may appear overvalued, yet the broader trend remains remarkably bullish. Historically, precious metals often rally alongside strong equity markets — although there is usually a delay before gold and silver begin to catch up.

In many cases, the stock market moves first, while metals and mining shares follow later as liquidity and investor enthusiasm gradually spill over into the sector.

Gold’s current pause is unfolding alongside a similar consolidation on this impressive CDNX weekly chart.

At the same time, the market appears to be adding the “final touches” of symmetry to a powerful inverse head-and-shoulders launchpad pattern — a formation that many investors view as a strong long-term bullish setup.

The daily chart for GDX shows that key momentum indicators — including the RSI, Stochastics, and MACD — are no longer confirming the latest low in price.

That positive divergence comes at the same time as the stock market’s powerful upside breakout, suggesting the current lull in precious metals could simply be the calm before a major rally.

The bigger questions gold investors should ask themselves are straightforward: If government narratives stop focusing on debt, does the debt suddenly disappear? Of course not. If gold stocks and silver have historically lagged behind the stock market before eventually staging explosive rallies, is it reasonable to expect that pattern to repeat? Absolutely. And is gold still one of the world’s most trusted and enduring forms of money? Many investors would say yes.

In short, for gold bulls, the strategy right now may simply be to stay patient — and stay optimistic.

A 40-year supercycle in commodities, inflation, and interest rates began in 2020 and is likely to extend through 2060.

As legendary commodities strategist Jeff Currie has argued, this cycle is fundamentally driven by a widening imbalance between demand and supply.

While the conflicts in Ukraine and Iran are acting as medium-term catalysts for higher prices, the longer-term trend is being fueled primarily by soaring global government debt and the economic rise of billions of consumers across Asia and Africa.

Some countries are feeling a greater impact than others from the US government’s latest debt-financed conflict with Iran, which has unfolded largely as many analysts feared.

As a result, certain central banks and gold-focused investors in affected regions have been selling gold holdings. Since most global assets and expenses are still denominated in fiat currencies, many households are liquidating “rainy day” gold savings instead of taking on additional debt.

From a broader perspective, advocates of hard assets argue that the global financial system would be more stable if it were centered on gold-backed savings rather than fiat-driven debt expansion.

Over time, the Strait of Hormuz is expected to reopen, potentially under a more permanent toll structure. Ironically, oil prices could climb even further after the conflict ends than they have during the war itself, raising the possibility of crude prices reaching $200 or even $300 per barrel.

Mainstream commentators have gradually shifted away from expecting aggressive rate cuts and renewed waves of quantitative easing, instead acknowledging at least part of the reality of this unfolding supercycle: interest rates may need to move higher.

What many still fail to recognize, however, is that rates could remain elevated for an extended period as policymakers struggle to offset the combined pressures of a long-term commodities boom and governments’ deep reliance on debt financing.

Notice the blue arrows on the left side of the chart: during the previous 40-year supercycle, interest rates experienced four separate periods of decline.

The current cycle is likely to follow a similar pattern: interest rates may trend higher overall, but with intermittent periods of decline along the way. That initial downward phase now appears to be approaching its conclusion.

A closer examination of the US rates chart highlights the move clearly. In late 2023, yields retreated from around 5% to roughly 3.5%, forming what technicians describe as a bullish triangle or pennant pattern.

An upside breakout now appears increasingly likely, potentially paving the way for a fresh advance toward the 6%–7% range.

What about gold? The weekly chart suggests that a sizable flag pattern may be developing, though rather than attempting to forecast the next major move, investors may be better served focusing on important accumulation zones.

From that perspective, the $4,100, $3,900, and $3,500 levels stand out as potential buy areas below the current market price where long-term gold investors could step in aggressively.

Meanwhile, the Stochastics oscillator (14,5,5) points to the possibility of further near-term weakness. The latest buy signal failed to gain traction and was triggered prematurely from above the oversold 20 threshold, indicating that downside pressure may not yet be fully exhausted.

A look at the daily chart shows several highlighted buy zones, both above and below the current market price.

For investors — particularly those involved in mining stocks — one of the most dependable strategies is to accumulate within these support zones during price pullbacks rather than chasing bullish breakouts after prices have already surged.

At present, the $4,500 area can still be viewed as a buy zone, though mainly for more aggressive traders, as the current pullback remains relatively modest.

As stagflation pressures deepen, additional gold selling from central banks in countries facing severe economic strain from the Strait of Hormuz disruption remains possible. That outlook aligns with the ongoing consolidation pattern on the charts and the indecisive behavior currently shown by momentum oscillators.

The long-term chart comparing GDX to gold shows that the market is currently pausing near the neckline of a massive inverse head-and-shoulders formation — a consolidation phase that many gold-stock investors had been warned to expect.

At this stage, patience may be the most important requirement. If the breakout eventually materializes, the rally that follows could be exceptionally powerful — and it may arrive sooner than many anticipate.

In simple terms, there is a crucial distinction between investors selling government bonds because economic growth is strong and selling them because confidence in governments’ ability to repay debt is beginning to erode.

At some point, institutional investors may stop avoiding gold because it offers no yield and instead start accumulating it out of concern that governments worldwide are losing control of their debt burdens. Such a shift could trigger an intense wave of buying in mining stocks as well.

What may lie ahead resembles a more extreme version of the inflationary 1970s environment — though for now, patience remains essential, because in this market, patience could prove golden.

Gold trades in a tight range during the Asian session, struggling to extend the prior day’s gains. It holds above $4,600 but is still set for a second consecutive weekly loss. A steadier US Dollar, supported by geopolitical tensions from stalled US–Iran talks, along with the Federal Reserve’s hawkish stance, continues to limit upside momentum.

Gold Technical Analysis

A push above $4,600 and the 100-hour Simple Moving Average (SMA) triggered some intraday short covering. However, the rally lost momentum before reaching $4,650, close to the 38.2% Fibonacci retracement of the drop from April’s peak. At the same time, the Relative Strength Index (RSI) stands at 58.33, indicating solid but not overbought conditions, while the Moving Average Convergence Divergence (MACD) remains slightly negative. Overall, momentum signals suggest that bullish pressure is present but still lacks strong conviction, even as prices stay above key short-term levels.

Given this setup, it may be wise to wait for a decisive break above the 38.2% Fibonacci level at $4,651.19 before expecting further upside from this week’s rebound off the $4,500 area, which marked a one-month low. If buyers gain traction, the next resistance could appear near the 50% retracement level at $4,696.20. On the downside, immediate support lies at the 100-hour SMA around $4,623.78. A drop below this level could open the door toward the 23.6% Fibonacci retracement at $4,595.49, with a deeper move potentially revisiting the broader swing low near $4,505.46 if selling pressure intensifies.

Fundamental Analysis

US President Donald Trump dismissed Iran’s proposal to reopen the Strait of Hormuz and ease the blockade while delaying nuclear negotiations. He stated that the US will maintain a naval blockade until Iran agrees to terms addressing concerns over its nuclear program, with reports also تشير to possible new US military strikes. These developments heighten fears of escalating tensions, supporting the US Dollar’s safe-haven appeal and weighing on Gold prices.

At the same time, the Federal Reserve kept interest rates unchanged at 3.50%–3.75%, with an unusually high level of dissent among policymakers. Recent US data showing rising inflation and continued economic strength reinforces expectations that rates could remain elevated into next year, further boosting the Dollar and pressuring Gold.

Data from the Bureau of Economic Analysis showed the PCE Price Index rose 0.7% month-on-month in March, with annual inflation accelerating to 3.5%. Core PCE also increased to 3.2% year-on-year. Additionally, the US economy grew at a 2.0% annualized pace in Q1 2026, a notable improvement from the previous quarter.

However, expectations for at least one 25-basis-point rate cut in 2026 have risen modestly, limiting bullish momentum in the Dollar and helping Gold avoid deeper losses. Market attention now turns to upcoming US data, particularly the ISM Manufacturing PMI, along with ongoing developments in the Middle East, both of which are likely to drive near-term price action.