By Linh Tran, Market Analyst at XS.com
After a sharp decline of nearly $380 from its record high of $4,380/oz in just two sessions, gold has become the focal point of investor attention. The key question now is whether this marks the end of the metal’s prolonged bullish cycle. However, when examining the underlying macroeconomic fundamentals and market sentiment, there is still insufficient evidence to conclude that gold’s long-term uptrend has ended.
In the short term, the recent sharp correction primarily reflects a temporary shift in investor risk appetite. Following more conciliatory remarks from U.S. President Donald Trump—in which he stated that the 100% tariffs on Chinese goods “would not be sustainable”—markets temporarily eased concerns over an escalation in the U.S.–China trade conflict. As a result, safe-haven flows retreated from gold and rotated back into risk assets such as equities and crude oil, leading to a rapid and steep pullback in prices. In addition, technical factors played a meaningful role, as profit-taking accelerated after an extended rally, while thin market liquidity amplified price reactions during the correction phase.
From a medium- to long-term perspective, however, the structural foundation supporting gold remains intact. First, the macroeconomic and geopolitical backdrop continues to be fraught with uncertainty. The U.S.–China trade dispute has entered a new phase, with Washington reportedly considering tightening export restrictions on products manufactured using U.S. software, while the Russia–Ukraine conflict persists and tensions in the Middle East remain unpredictable. These dynamics sustain long-term demand for safe-haven assets, particularly gold.
Furthermore, the Federal Reserve’s monetary policy cycle is transitioning toward a potential turning point. Although the Fed continues to hold interest rates at elevated levels, markets increasingly believe that the rate-hiking cycle has peaked, and the quantitative tightening (QT) program may soon conclude. As expectations of monetary easing rise, real yields tend to decline, thereby enhancing gold’s appeal as a non–interest-bearing asset.
Fiscal risk is another key factor supporting gold in the medium term. U.S. national debt has surpassed $37 trillion, while the prolonged federal government shutdown has disrupted economic data releases and eroded consumer confidence. Against this backdrop, many institutional investors view gold as a non-sovereign reserve asset, capable of preserving portfolio value in an environment of high debt and policy uncertainty.
Additionally, structural demand from central banks remains steady, with no signs of a material reversal. Emerging-market economies continue to increase gold purchases to diversify foreign-exchange reserves and reduce dependency on the U.S. dollar. This persistent accumulation acts as a silent anchor, helping to stabilize gold prices over the long run even amid volatility in global financial markets.
That said, gold still faces short-term headwinds. The strength of the U.S. dollar and real yields hovering around 4.3–4.4% remain significant constraints on near-term recovery. Moreover, if ETF outflows persist, short-term selling pressure could extend further. Nevertheless, these factors appear temporary rather than structural, likely slowing the pace of recovery rather than reversing the broader trend.
In my assessment, the recent sharp selloff is noteworthy but does not mark the end of gold’s upward trajectory. Amid an increasingly uncertain global economic and geopolitical landscape, gold continues to serve as a strategic safe-haven asset and a defensive cornerstone in institutional portfolios. As long as prices hold above the psychological support level near $4,000/oz, the potential for stabilization and reaccumulation remains intact. In fact, each deep correction may present a strategic opportunity for reallocation ahead of the next phase of the long-term bull cycle in gold.