Gold Market Update: Fundamental Tailwinds Remain Firm as Prices Pull Back Toward Support

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Introduction

Gold has been one of the standout assets this year, rallying sharply on a combination of macroeconomic tailwinds, supportive central-bank flows, and a resilient technical trend. Even with the recent retracement, the broader backdrop remains constructive—and the market continues to behave in a way that fits the long-term bullish narrative. As of this week, gold is down nearly 8% from its late-October high, easing from overextended conditions but still holding just over 1% above its 50-day moving average. The pullback brings the metal back toward trend support without materially altering the broader bullish structure.

Below is a breakdown of the fundamental and technical forces shaping the current move:

Fundamental Drivers Behind This Year’s Move Higher
1. Real Interest Rates Are Finally Easing

One of gold’s strongest historical relationships is with real yields. As real rates fall, the opportunity cost of holding non-yielding assets declines, attracting capital into gold. This year:

• Inflation has proven sticky, but real yields have pulled back as expectations for future rate cuts increase.
• Markets are now pricing a softer Fed trajectory, reducing rate-pressure on gold.

Lower real rates have consistently translated into periods of strong gold performance—and 2025 has been no exception.

2. Central Banks Continue Their Near-Record Buying

Global central banks—particularly across emerging markets—have aggressively added to their gold reserves for three straight years.

Key themes:

• China, India, Turkey, and several Middle Eastern nations have been consistent buyers.
• The trend reflects a long-term move toward reserve diversification and reduced reliance on the U.S. dollar.
• Central-bank buying has provided a durable floor under the market, often absorbing dips that otherwise could have triggered deeper corrections.

This reserve-accumulation demand is structural, not speculative, and remains a core pillar of gold’s long-term strength.

3. Ongoing Geopolitical Instability

Gold thrives during uncertainty, and this year’s geopolitical landscape has delivered more than enough fuel:

• Conflicts in Eastern Europe and the Middle East
• Rising tensions between the U.S. and China
• Growing concerns about global election cycles

Each flare-up has reinforced gold’s role as a portfolio hedge, supporting flows even during risk-on equity periods.

4. A Softer U.S. Dollar Trend

While the U.S. dollar remains strong relative to historical norms, the multi-month drift lower from its 2024 highs has eased pressure on commodity prices. A weaker dollar mechanically boosts dollar-denominated assets like gold, and this year’s moderate softening has helped keep gold’s uptrend intact.

Technical Landscape: Trend Still Dominant Despite the Pullback

Despite meaningful volatility since late October, the technical structure of the gold market remains constructive.

1. Gold Continues to Respect the 50-Day Moving Average

Throughout the year, gold has repeatedly:

• Rallied away from the 50-DMA during bullish impulses
• Pulled back toward the 50-DMA during consolidation phases
• Used the 50-DMA as a dynamic support level

Even after the current pullback, gold now sits just over 1% above the 50-DMA, staying aligned with its medium-term trend. This is consistent with prior pauses within larger uptrends—suggesting the correction may be a recalibration rather than a reversal.

2. The Market Is Down Nearly 8% From the Late-October High

Gold surged aggressively into late October, when momentum pushed the market several standard deviations above its trend. The recent decline:

• Relieves overbought conditions
• Reduces the risk of a deeper technical breakdown
• Keeps longer-term moving averages rising cleanly

In other words, the pullback appears healthy, not destructive.

3. Longer-Term Trend Structure Remains Bullish

Gold maintains:

• Higher highs and higher lows
• A rising 50-DMA
• A rising 200-DMA with expanding slope
• Positive trend confirmation across multiple timeframes

Momentum indicators such as RSI have eased out of overbought territory, creating room for the next leg higher without the burden of stretched conditions.

What to Watch Going Forward

Three key triggers could determine gold’s next move:

1. Real Yields and Fed Expectations

Any shift in the Fed’s language or inflation trajectory will immediately ripple into gold. A sustained decline in real rates remains the most bullish scenario.

2. Central-Bank Buying Pace

While reserve flows are consistent, any 

acceleration—or slowdown—will impact price stability on dips.

3. Geopolitical Events

With multiple hotspots globally, gold remains sensitive to headline risk. Escalations typically produce quick upside spikes.

Bottom Line

Gold’s pullback this month should be viewed through the lens of a long-running bullish trend supported by powerful fundamentals. The metal remains:

• Structurally strong
• Fundamentally supported
• Technically aligned with its rising 50-day moving average

With gold down nearly 8% from its recent peak but still hovering just above key trend support, the current environment looks like a consolidation phase within a larger uptrend—not the end of it.

More Information

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Darren Carlat

Dual Edge Research

(214) 636-3133

DualEdgeResearch@gamil.com

www.BullStrangle.com

Disclaimer

This information is for informational purposes only and should not be considered as investment advice. Past performance is not indicative of future results, and all investments carry inherent risk. Consult with a financial advisor before making any investment decisions.