Precious metals and gold, in particular, caught investors' eyes early this year when the typically slow-growing asset gained almost 100% in the space of just a year. What would be rather impressive for a high-risk growth stock is practically unprecedented for the quintessential store of value and volatility hedge, and speculation on the yellow metal was rife. Unsurprisingly, this eventually led to a rather sizeable correction once the fundamental factors that had led to the initial bull cycle began to wash out, and on 16 April, gold sits at $4,835.60 per Troy ounce, down nearly 14% from its January ATH of $5,589.38. This comes after the metal fell below $4,500 in late March, before consolidating into a sideways channel during April.
Of course, the fundamentals for gold's bull run are clear. The geopolitical situation is about as tense as it gets, with multi-regional conflicts blazing across Europe, the Middle East and South America. Meanwhile, the closure of the Strait of Hormuz and the virtually non-existent US-Iran ceasefire mean oil supplies and business sentiment are precarious. When we add to this the ongoing central bank bulk-buying, sticky inflation and general flight from the US dollar, gold's elevated status is totally understandable. But what investors would like to know is how these factors might continue to develop in the second half of the year and what that will mean for prices.
Dark macroeconomic forces
As we mentioned above, gold prices have eased in recent sessions despite persistent geopolitical tensions, which only underlines the extent to which macroeconomic forces are currently driving the market. With the yellow metal now consolidating in and around $4,800–$4,830, US real yields remain above 2%, and investors have scaled back expectations for near-term easing from the Federal Reserve. Despite the appointment of Trump's man, Kevin Warsh, policymakers have continued to signal a "higher-for-longer" stance, citing the risk of reigniting inflation. This has kept US Treasury yields elevated, with the 10-year yield trading between 4.2& and 4.3%, thus increasing the opportunity cost of holding non-yielding assets like gold.
At the same time, the US dollar has continued to hold firm near multi-month highs, supported by yield differentials and continued capital inflows into US assets, making bullion more expensive for non-US buyers. Combined with a still-resilient global growth backdrop, particularly in the US, where GDP growth has remained above trend, up until now, these factors have encouraged a rotation into equities and fixed income, leaving safe-haven demand insufficient to offset macro headwinds. Recent declines in price pressure towards the Fed's 2% target have also reduced the urgency for investors to hold gold as a hedge, particularly in the absence of imminent rate cuts, but March's CPI figure of +3.3% could lead to renewed buying if the current oil price crisis is not soon remedied.
The uncertainty premium
Even though the wider economic background has been more conducive towards risk assets of late, gold continues to find support from structural and risk-related drivers that are helping to limit downside moves. Ongoing geopolitical tensions and trade uncertainty continue to frame it as a major defensive asset, even if much of this risk is, by now, already priced in. A more significant support, though, is the historically high and enduring central bank demand. Official sector purchases totalled around 863 tonnes in 2025, coming on the back of record buying of over 1,000 tonnes in both 2023 and 2024. This sustained pace, which is well above the long-term average of 400–500 tonnes per year, reflects a structural shift in reserve management. Key buyers such as the National Bank of Poland, which added more than 100 tonnes last year, and the People's Bank of China, which has steadily increased its holdings to over 2,300 tonnes, continue to diversify away from dollar-denominated assets.
As the World Gold Council has noted, "central banks remain focused on building resilience through gold allocations," and this has helped to build and reinforce a solid price floor. Meanwhile, investor flows have been more mixed. Gold-backed ETF holdings have seen intermittent outflows in recent months as higher yields reduce their appeal, and this has contributed to some of the short-term volatility we've recently seen. Looking ahead, the outlook for gold will depend largely on the timing of monetary easing and the trajectory of the dollar. A shift toward rate cuts and lower real yields could support renewed inflows, while a prolonged period of elevated rates may keep prices range-bound, with central bank demand acting as a stabilising force rather than a catalyst for sustained gains. Of course, geopolitical conflict remains a significant wildcard, and any escalation in the Middle East could lead to a major bull run at any time.
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