Gold Bulls Take a Beating But Are They Down and Out? -

Gold has been pounded lower over the last two weeks and is now struggling to hold the $4,000 level.
Are the bulls dead?
It’s important to keep the selloff in perspective. As I put it in my podcast last week, “<a href="https://www.moneymetals.com/news/2025/10/23/keep-your-eye-on-the-ball-metals-liquidity-fed-pivot-004431">keep your eye on the ball</a>.”
Corrections are healthy and normal in a bull market. But a big selloff could also indicate the end of a bull run.
So, where are we now?
Even with the big selloff, gold is still up over 89 percent since Jan. 1, 2024. The yellow metal ran from $3,500 to $4,000 in just 36 days. It’s been a remarkable run, and it will end at some point.
The question investors need to ask themselves is: are the fundamentals that pushed gold to record levels still in play?
<h2>Risk On! Book Those Profits!</h2>
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Two dynamics seem to be driving the current selloff.
First is simple profit-taking.
With gold scaling record after record, many investors are taking the opportunity to book big profits. As the price dips, more profit-takers jump on the bandwagon. The question becomes: when will the bargain seekers step in and stabilize the market?
The second factor seems to be optimism that the U.S. and China are on the brink of a trade deal.
This has put investors in a risk-on mood. FOREX.com analyst Fawad Razaqzada noted, “As risk sentiment improved, the S&P 500 reached fresh record highs, leaving safe-haven assets like gold on the back foot.”
However, uncertainty remains the name of the game when it comes to trade policy. Razaqzada said that “while these developments have lifted market spirits, analysts remain skeptical that the underlying issues — such as national security and tech competition — will be fully resolved.”
<h2>The Case for the Gold Bulls</h2>
Even with the recent downturn, there is still a strong fundamental case for the bulls, with at least five factors working in gold's favor.
<ol>
<li>Falling <a href="https://www.moneymetals.com/news/2025/02/17/why-inflation-and-real-interest-rates-are-bullish-for-gold-003841" rel="noreferrer">real interest rates</a></li>
<li>Persistent <a href="https://www.moneymetals.com/news/2025/10/25/september-cpi-better-than-expected-doesnt-mean-good-004439" rel="noreferrer">inflation</a></li>
<li>Ongoing trade and geopolitical uncertainty</li>
<li>U.S. <a href="https://www.moneymetals.com/news/2025/10/23/in-the-blink-of-an-eye-the-national-debt-exceeds-38-trillion-004434" rel="noreferrer">fiscal irresponsibility</a> and de-dollarization</li>
<li><a href="https://www.moneymetals.com/news/2025/10/23/former-fed-advisor-recent-gold-and-silver-selloff-reflect-rot-in-the-financial-system-004430" rel="noreferrer">Systemic risks</a> in the financial system</li>
</ol>
However, these bullish fundamentals don't preclude corrections or even more prolonged periods of consolidation.
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Saxo Bank commodity strategist Ole Hansen said that we could be entering into a longer consolidation period like we saw after gold cleared $3,000 an ounce in April, and then churned sideways for four months.
<blockquote>
“The recent price action raises the possibility that the high for the year may already be in place, as a deeper pullback could take time to recover from amid rising trader caution and renewed strength in equities.”
</blockquote>
However, Hansen pointed out that “the reasons for holding gold haven’t suddenly disappeared.”
<blockquote>
“In my view, the next leg higher is more likely a story for 2026, not least considering the latest consolidation period that started back in April lasted four months.”
</blockquote>
Metals Focus still projects $5,000 gold in 2026, citing “ongoing uncertainty surrounding US trade policy, and its impact on the global economy,” along with declining interest rates as the Fed continues to cut interest rates and ends its <a href="https://www.moneymetals.com/news/2025/10/16/fed-chair-powell-balance-sheet-reduction-may-end-soon-004414">balance sheet reduction efforts</a>.
Metals Focus also noted <a href="https://www.moneymetals.com/news/2025/10/23/in-the-blink-of-an-eye-the-national-debt-exceeds-38-trillion-004434">the massive national debt</a>, saying that “confidence in the U.S. dollar and Treasury markets is unlikely to improve significantly, given the deteriorating fiscal outlook and lingering concerns about the Fed’s independence.”
<blockquote>
“Geopolitical tensions are expected to remain elevated. Combined with broader macroeconomic uncertainty, this should continue to support investor interest in portfolio diversification.”
</blockquote>
Meanwhile, Metals Focus analysts say <a href="https://www.moneymetals.com/news/2025/10/06/central-bank-gold-buying-rebounded-in-august-004386">central bank gold buying</a> should continue to support the market.
<blockquote>
“Although volumes may not match the record highs of 2022-2024, central banks are likely to remain substantial net buyers relative to historical averages, driven by efforts to diversify away from the U.S. dollar.”
</blockquote>
Even with the recent selloff, Morgan Stanley raised its price forecast, calling for $4,400 gold in the new year.
<blockquote>
“Investors are watching gold not just as a hedge against inflation, but as a barometer for everything from central bank policy to geopolitical risk. We see further upside in gold, driven by a falling U.S. dollar, strong ETF buying, continued central bank purchases and a backdrop of uncertainty supporting demand for this safe-haven asset.”
</blockquote>
Morgan Stanley analysts remain bullish partly because gold demand is being supported by several sectors.
<blockquote>
“For the first time since 1996, gold now accounts for a larger share of central bank reserves than U.S. Treasuries—a powerful signal of confidence in the metal’s long-term value. Exchange-traded funds (ETFs) have also been strong buyers of gold, signaling renewed interest from institutional investors. ETFs backed by physical gold posted a record inflow of $26 billion in the third quarter. Their total assets under management ended the quarter at $472 billion, also a record.”
</blockquote>
Morgan Stanley analysts also expect a generally weaker dollar to support the yellow metal. 
<blockquote>
“As markets expect the U.S. dollar to weaken on prospects of slower growth in the world’s largest economy, many investors are shifting their safe-haven portfolios, moving from dollar-denominated assets to gold. Additionally, a weaker dollar makes gold more affordable for international buyers."
</blockquote>
Capitalight head of research Chantelle Schieven said gold could test $3,750, but called gold's downside potential "limited."
<blockquote>
“This correction appears to represent a healthy consolidation within the broader structural bull market, and we continue to maintain a constructive long-term outlook for gold, given the ongoing macroeconomic and policy risks.”
</blockquote>
If you believe gold still has long-term support, you should view these selloffs as buying opportunities.

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