While conflict rages in the Middle East, gold has unexpectedly retreated, giving up nearly a quarter of its gains since US and Israeli actions against Iran. This has temporarily contradicted the traditional safe-haven narrative. However, Barclays' cross-asset team offered a contrarian view in a Monday report, suggesting the recent sell-off has created a buying opportunity. The bank argues the current price is approaching its calculated fair value of $4,150 per ounce, indicating a potential rebound window is opening.
Barclays attributes this significant correction to three temporary disruptions rather than a long-term trend reversal. First is the combination of a strengthening US dollar and capital flowing into US equities (the sharp dollar rally and the S&P 500's roughly 10% rebound alone could account for about 10% of gold's decline). Second is a crowded trade unwinding, where excessive long positioning led to amplified volatility as leveraged positions were forced to liquidate. Third is temporary central bank selling, with Russia and Turkey offloading gold to support their local currencies, creating additional downward pressure. The report emphasizes that the true long-term drivers for gold, or "slow variables," have not disappeared. These include US inflation and global central bank gold purchases. The bank states these factors will reassert their pricing power once the peak of geopolitical tensions subsides.
The core logic of Barclays' model indicates that for every 1 percentage point increase in inflation, the gold price could rise by approximately 5%. The current inflationary pressures stemming from energy shocks should therefore be supportive. Coupled with the ongoing demand for reserve diversification (de-dollarization) among global central banks, the foundation for a long-term gold bull market remains intact. Consequently, Barclays maintains its two-year price targets of $4,791 for 2026 and $4,900 for 2027.
Analysis of the Latest International Gold Market
Yesterday, gold opened with a direct gap higher and maintained an overall upward, oscillating rhythm throughout the day. The Asian and European sessions continued the bullish momentum, and even into the early US session, prices steadily climbed higher with almost no significant corrective pullbacks, presenting a continuous one-sided ascent. It wasn't until after 10 PM that the market finally saw a retracement, with the price pulling back to a low of 4306 in the morning session. Currently, the price has temporarily found support and stabilized around this level.
Given the ample single-day gains and consecutive highs achieved yesterday, the overnight retracement should first be characterized as a technical correction within an uptrend. Pullbacks in strong bullish trends are often normal adjustments, after which strength typically resumes. The key for the day is whether this correction will lead directly back to strength or if it will disrupt the original upward structure, potentially leading to a new round of decline. The holding or breaking of the 4306 level is therefore crucial.
In a typical correction, prices do not continuously break to new lows. As the key level where the morning retracement found support and stabilized, 4306 naturally becomes the core defensive position for bulls to maintain a strong posture today. For the bullish trend to continue, the price must not sustain a break below this support level. In theory, after touching the 4306 support, the price should experience a rapid rebound. The key resistance for this rebound is concentrated near 4326. Currently, the rebound momentum from the support level is relatively weak. Therefore, whether the price can effectively break through 4326 also serves as an important signal to confirm the validity of the 4306 support.
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