Has Gold Found a Bottom?

No. Gold has fallen roughly 25% from its recent peak to around $4,000 per troy ounce, but we still see further downside. Several of the forces that drove gold higher have weakened or reversed in recent months. A more challenging real-rate backdrop, less supportive demand trends, and fading investor momentum still argue for caution.

It’s easy to see why investors would expect gold to provide a safe haven under current conditions. But recent geopolitical developments pushed oil prices and inflation expectations higher, leading markets to price a higher-for-longer path for interest rates. Because gold has no cash flows, it tends to struggle in higher real-rate environments. Early signals from new Federal Reserve Chair Kevin Warsh have also reinforced confidence in Fed independence while signaling a somewhat hawkish bias, removing another support that had helped gold.

The demand picture also looks less supportive. Central bank buying has been a steady tailwind for gold in recent years, but its significance for the near-term price outlook is overstated. Purchases remain well above pre-2022 levels following Russia’s invasion of Ukraine, but buying has largely leveled off, and the rolling four-quarter rate of change in central bank holdings has slowed. Moreover, according to Invesco, one-third of central banks plan to increase gold allocations over the next three years, down from one-half that increased exposure over the past three years. Continued central bank buying can support gold, but it is no longer an incremental source of demand likely to drive prices materially higher.

Instead, speculative momentum now looks like the more important driver. Global gold exchange-traded funds (ETFs) saw record inflows of roughly $89 billion in 2025, underscoring how strong investor demand had become during the rally. Since gold prices peaked in January, more than $10 billion has flowed out of gold ETFs, suggesting that only some of last year’s retail inflows have reversed. That unwind may partly reflect a rotation toward other momentum trades, including artificial intelligence and semiconductors. Either way, the withdrawal of that support has amplified the decline and reinforced how sensitive gold has become to investor sentiment. Broader access to retail-oriented gold derivatives could make gold even more sensitive to short-term shifts in sentiment.

Gold is often treated as a safe haven, but that label exaggerates its reliability to protect portfolios. It can perform well in certain tail-risk scenarios, including stagflation or financial repression, but it also comes with meaningful volatility, limited real return, and occasional large drawdowns. While the recent 25% decline is meaningful, it is not unusual in the context of gold’s history. After peaking in 1980, for example, gold lost more than 50% over an 18-month span as sharply higher real rates undermined its appeal, and gold has experienced five other drawdowns of more than 40% over the past 50 years. Even after the recent sell-off, gold prices remain 23% higher than a year ago, and therefore do not yet look particularly oversold.

We continue to see downside risk in gold and would be cautious about adding after the pullback. Existing holders may still view gold as a portfolio diversifier, and its appeal may be greater for investors that have significant US dollar exposure with liabilities denominated in other currencies. Even so, given gold’s price risk and the availability of other currency-hedging tools, we would remain cautious in advocating new allocations at current levels. A more constructive stance would require lower real rates, improving investor flows, and stabilizing momentum.