Gold traders have struggled to gauge market direction this year. Bullion first hit all‑time highs before a sharp pullback. Now, driven by shifting Federal Reserve policy expectations and a fresh wave of buying, the market is debating whether this rebound can sustain. Several key signals ahead may determine gold’s further strength.
New High Early in the Year Followed by More Than 18% Correction
Gold touched an all‑time peak near $5,589 per troy ounce on January 28, then fell over 18% from that record level. Even so, prices remain well above the 52‑week low, showing bulls have not fully exited the market.
Two weeks ago, gold posted its strongest weekly performance since January, rising more than 7%. It extended gains last week. The rally was fueled by softer‑than‑expected U.S. jobs data and moderate inflation prints, which scaled back market bets on a September Fed rate hike. Gold‑linked equities had already traded at elevated levels; combined, these factors accelerated gold’s rebound.
Rate‑Cut Expectations Regain Market Focus
Repricing around the Fed’s policy path has become the core variable for gold markets. If upcoming economic data keep signalling slowing U.S. growth and fading inflation pressure, bets on monetary eASIng could strengthen further and continue supporting the non‑yield‑bearing asset gold.
Pippa Malmgren, former Special Assistant to President George W. Bush and member of the National Economic Council, told CNBC: “Gold is the new gold.”
In her view, the rationale for capital flowing into gold remains intact: chiefly worries over runaway U.S. fiscal spending, plus prospects for inflation driven by sluggish growth across most of the globe.
Central‑Bank Buying Continues to Underpin Prices
Beyond macro expectations, peRSIstent central‑bank gold accumulation provides a floor under prices. Malmgren argues this reflects ongoing erosion of market confidence in fiat currencies.
According to Caixin Global, Patrick Kennedy, founder of AllSource Investment Management, stated that the People’s Bank of China (PBOC) added 19.9 tonnes of gold in July. This marks its largest monthly purchase since late 2023 and the 21st consecutive month of net buying. At this pace, China’s gold‑buying cycle has stretched for more than one year.
Hedge‑fund billionaire John Paulson also believes the gold bull market is still in its early phase. He points to fading trust in paper currencies and no signs of slowing government spending, factors that should support higher gold prices.
Goldman Sachs holds a similar view. The bank forecasts central banks will keep buying roughly 60 tonnes of gold per month through 2026, as reserve managers continue diveRSIfying away from dollar‑denominated assets. This stands in sharp contrast to earlier this year, when higher rate expectations triggered multi‑billion‑dollar outflows from gold ETFs before those outflows began moderating.
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