Gold’s Rally: Healthy Pullback or End of the Road?
Key Takeaways
- The 6% pullback is a technical breather after a massive YTD rally, not a trend reversal.
- Central bank buying, inflation pressures, and safe-haven demand keep fundamentals bullish.
- $4,000 remains key support — watch for a rebound toward $4,200+ into year-end.
Spot gold stabilized around $4,093 per ounce on October 23, 2025, after a volatile week that saw prices swing from a record high near $4,381 to intraday lows below $4,000, marking an over 6% correction from peak levels. 0 4 This sharp retreat—the largest single-day drop in over a decade—has sparked debates: Is the blistering 50%+ year-to-date rally over, or merely pausing for breath amid profit-taking and shifting risk sentiment? 19 22 Short answer: Not over. The fundamentals point to a sustained uptrend, with the current dip looking like a tactical reset rather than a reversal.
Fundamental Drivers: Bullish Foundations Hold Firm
Gold’s explosive 2025 run has been fueled by a perfect storm of central bank hoarding, geopolitical jitters, and monetary easing—drivers that remain largely intact despite the pullback.
Key Supports:
Central Bank Demand: Purchases hit a record 710 tonnes quarterly pace, with emerging markets like China and India diversifying reserves amid U.S. debt concerns and dollar debasement fears. 17 26 This structural buying isn’t fading; HSBC notes it could propel prices to $5,000 by 2026. 21
Inflation and Rate Cuts: Sticky inflation (U.S. PCE eyed at 2.7%) and Fed divisions on further easing keep real yields suppressed, favoring non-yielding gold. 3 20 ETF inflows surged $64 billion YTD, signaling investor hedging against policy risks. 23
Geopolitical Tailwinds: Ongoing U.S.-China tariff skirmishes, Ukraine stalemates, and MENA tensions (e.g., fragile Gaza truce) sustain safe-haven flows, even as trade optimism tempers short-term bids. 19
Near-Term Headwinds: Profit-booking after the overstretched rally, a rebounding dollar (DXY up 0.4%), and post-Diwali demand lull in India have triggered the sell-off. 22 X sentiment echoes this, with traders calling it a “healthy correction” and “buy-the-dip” moment. 14 8 Yet, analysts like those at Citi see consolidation, not collapse, as trade deals and shutdown resolutions loom.
Technical View: Oversold Bounce in Play
The chart shows classic post-rally exhaustion: RSI dipped below 30 (oversold), and prices held the $4,000 psychological floor after probing $4,004 lows. 4 The uptrend from mid-2023 remains intact above the 200-day SMA near $3,800, with a double-bottom forming at $4,000 signaling potential reversal. 18
Key Resistance: $4,150–$4,200 (flipped prior support). A break here could confirm resumption.
Critical Support: $3,950–$4,000. Breach risks a deeper 10-15% retracement to September lows, but low conviction suggests limited downside.
Scenario Outlook: Rally Resumes with Volatility
Base Case: Pullback to Consolidation (65% Probability)
Target: $4,100–$4,200 range.
Profit-taking fades as CPI data (Oct 30) reignites rate-cut bets; expect chop until Q4, then push to $4,240 by year-end per Investing.com forecasts. 18Bullish Continuation
Target: $4,300+ (new highs).
Geopolitical flares or dollar weakness (e.g., failed trade truce) trap shorts, aligning with JPMorgan’s $4,000 mid-2026 call. 17Bearish Extension (Low Probability)
Target: $3,800.
Swift trade resolution and hawkish Fed surprise extend the correction, but contradicts 2025’s debasement narrative—unlikely without major shifts. 25
Key Takeaways:
Gold’s 6%+ correction from $4,381 is a technical reset after a 50% YTD surge, not the rally’s end—fundamentals like central bank buying remain robust. 19 26
Profit-taking and dollar strength drove the dip, but oversold signals and ETF inflows point to a quick rebound. 23
$4,000 holds as pivotal support; watch U.S. CPI and trade headlines for the next leg up to $4,200+. 18
Long-term bulls intact: BofA/HSBC eye $5,000 by 2026 amid policy risks—view this as a high-conviction accumulation zone. 3 21
Final Word
The gold rally isn’t over—it’s recharging. After doubling in under two years, this pullback offers a rare entry for patient investors hedging inflation and uncertainty. 23 Traders: Scale in above $4,000 with stops below, eyeing volatility from tariffs and data. For portfolios, gold’s diversification edge shines brighter in turbulent times—position accordingly.
