Key Takeaways:
Gold's 24-week correction has yet to run its course, with the metal's death cross pointing to further downside toward $3,500 before a durable bottom forms, even as central bank buying at 81 tonnes per month provides a price floor.
Gold traded in a narrowing range this week as conflicting signals from technical indicators and physical demand kept the market in a tug-of-war. Bank of America's technical analysis shows the metal remains in a downward channel after a death cross formed on the daily chart, a pattern where the 50-day moving average crossed below the 200-day moving average. The bank identifies $3,500 per troy ounce as the next major support zone, a level that has not been tested since the current correction began.
"The current pullback has lasted 24 weeks, compared with a 121-week uptrend that preceded it, suggesting the correction cycle may not be complete," a Bank of America technical strategist said. The bank noted that TD sequential indicators have flashed a potential reversal signal, though the broader channel remains bearish until gold breaks above resistance near $3,800.
Central bank demand continues to provide a structural backstop. Goldman Sachs estimates global central banks purchased 81 tonnes of gold in May, or 67 tonnes per month on a three-month seasonally adjusted basis, well above the pre-2022 average of 17 tonnes. China's actual accumulation may be running at nearly five times the officially reported figures, according to the bank, which estimates Beijing acquired 48 tonnes through the London OTC market in May alone versus the 10 tonnes reported by the People's Bank of China.
Central Bank Buying Accelerates as Reserve Diversification Deepens
The World Gold Council's May 2026 survey found that 89% of responding central banks plan to increase gold holdings over the next year, while 45% intend to raise gold's share of total reserves. Goldman Sachs maintained its year-end 2026 price target of $4,900 per troy ounce, anchoring the forecast on average monthly central bank purchases of 50 tonnes in 2026 and 40 tonnes in 2027.
BNP Paribas flagged a potential anomaly in March, when official sector gold holdings posted their first net decline in 14 months. The bank described the move as a likely short-term aberration rather than a reversal of the accumulation trend, noting that the broader trajectory remains firmly toward higher reserve allocations.
Fund Flows Show Divergence Between Futures and Options Markets
Futures positioning data reveals a split in investor sentiment. Despite gold's decline from its early-2026 highs, net speculative long positions as a share of open interest remain elevated, according to Bank of America. BNP Paribas said fund managers added to long positions during June's selloff, betting on a medium-term recovery.
Options activity tells a different story. Since March, funds have been net buyers of gold put options, a strategy used to hedge downside risk, according to BNP Paribas. The put buying suggests institutional investors are not fully convinced the correction has ended, even as they maintain core long exposure through futures.
The macro backdrop is shifting in gold's favor on longer timeframes. US public debt has increased by roughly $3 trillion since July 2025, according to BNP Paribas, fueling concerns about fiscal sustainability that could drive sustained gold allocation. The metal's correlation with US equities has also turned negative in 2026 after spending most of 2024 and 2025 in positive territory, restoring its traditional role as a portfolio hedge.
Gold at $3,500 would represent a decline of roughly 12% from its early-2026 peak and would test a level that Bank of America describes as a "critical technical枢纽." A break below that threshold could open the door to a deeper correction toward $3,200, while a successful hold would reinforce the case for a resumption of the long-term uptrend anchored by central bank buying and fiscal concerns.
This article is for informational purposes only and does not constitute investment advice.
