Gold's Bull Run: Can Central Banks and Fed Easing Overcome Easing Tensions?

The price of gold (GC=F) opened at $3,377.40 on June 6, 2025, clinging to support near $3,300 amid a tug-of-war between fading safe-haven demand and structural bullish forces. While easing U.S.-China trade tensions have reduced gold's haven appeal, the metal's trajectory is being reshaped by two unstoppable trends: relentless central bank purchases and shifting expectations around Federal Reserve policy. This is a contrarian's dream—a dip below $3,300 could mark a buying opportunity for those willing to look past short-term noise.

The Contrarian Case: Why the Bulls Still Rule

1. Central Banks Are Gold's New Baseline Support
Central banks bought 244 tonnes of gold in Q1 2025, down 21% from Q1 2024 but still 25% above the five-year average. Poland's National Bank alone added 49 tonnes, pushing its gold reserves to 21% of total assets—exceeding its 20% target. These purchases aren't a blip; they're a 16-year trend. China, despite reporting only 13 tonnes added, is estimated to hold over 5,000 tonnes through covert channels.

The shift is geopolitical, not cyclical. De-dollarization, inflation protection, and sanctions-proof reserves are driving this. Even minor sellers like Uzbekistan and Russia are likely profit-taking at record prices, not abandoning gold. This creates a price floor: central banks now hold 35,500 tonnes, or 17% of all mined gold.

2. Fed Easing Expectations Are Gold's Wildcard
The Fed's March meeting kept rates at 4.25%-4.50%, but the FOMC now projects two rate cuts by year-end. Why? Trade policies under the Trump administration are raising inflation risks, forcing the Fed to walk a tightrope.

The May jobs report showed unemployment at 4.2%, a “sweet spot” that allows the Fed to pivot. If June's CPI data cools, a July cut becomes likely. Lower rates reduce the opportunity cost of holding gold, and a weaker dollar—already down 3% against majors this year—gives it a tailwind.

Technical Validation: $3,300 Isn't Just a Number

Gold's $3,300 level is more than a round number; it's a technical battleground.

• Support Structure: The $3,300-$3,350 zone has held since late 2024. A breach below $3,250 would risk testing the 200-day moving average ($3,200), but that's unlikely without a major macro shock.
• Volume Clues: Recent trading volume has been light below $3,400, suggesting buyers are accumulating.
• Seasonality: Gold typically strengthens in Q3, with geopolitical risks (e.g., Middle East tensions) often spiking during this period.

The Trade: Buy the Dip, but Set Stops

This is a contrarian setup. The $3,300-$3,350 area is a “buy the pullback” zone, with a stop below $3,250. Here's why:

• Bullish Macro Drivers: Central banks will buy regardless of short-term sentiment. Goldman Sachs' $3,700 target by year-end isn't a fantasy—$3,400 is just the first step.
• Fed Pivot Timing: If the Fed cuts in July, gold could gap higher. Even a pause will keep rates anchored, favoring gold over bonds.
• Technical Momentum: A close above $3,400 would signal a resumption of the uptrend.

Final Call

Gold is in a holding pattern, but the fundamentals are screaming “bull market.” Easing trade tensions have taken the edge off haven demand, but central banks and Fed easing are the real game-changers. Positioning below $3,300 is a contrarian's bet with a high reward-to-risk ratio. The path to $3,700 is clear—if you're willing to buy when others fear to tread.

Investment Recommendation: Accumulate gold ETFs (e.g., GLD) or futures on dips to $3,300, with stops below $3,250. Target $3,500-$3,600 by year-end, with a long-term horizon to $3,700+.

Note: Past performance does not guarantee future results. Always consider your risk tolerance and consult with a financial advisor.