Gold's Volatile Rebound: Assessing the Bull Run's Durability

The recent price action in precious metals has been nothing short of dramatic. On Tuesday, February 3, gold surged over 5% and silver jumped nearly 6%, staging a powerful comeback after a historic two-day rout. The metals had slumped sharply, with gold falling nearly 10% and silver collapsing 30% in a single session last Friday. This violent swing has framed a central question: is the rebound a temporary technical bounce or the start of a new leg up in the bull market?

Analysts are divided on the interpretation. Some view the steep drop as a classic correction within a longer-term uptrend, driven by a mix of political and technical factors. The catalyst was widely seen as the nomination of Kevin Warsh as the next Federal Reserve chair, which sparked a flight to safety and a stronger dollar, pressuring the metals. The subsequent margin requirement hikes by CME Group added further downward momentum. "I view the recent drop as a correction within a longer-term uptrend," said Peter Grant, a senior metals strategist. "At this point, we may see a corrective phase, with key support around $4,400 on the downside, and resistance likely around $5,100 on the upside."

From this perspective, the rebound is a natural market reset. Gold's rebound today reflects renewed dip buying after one of the sharpest corrections in precious metals in years," noted ING's Ewa Manthey. She and others argue that the underlying fundamentals remain robust, with investors seeking protection amid ongoing economic and political uncertainty. The rally on Tuesday, which saw gold on track for its biggest daily gain since November 2008, is seen as bargain-hunting by those who believe the metals were oversold.

Yet the path forward is highly sensitive to shifting macro conditions. The near-term direction of both metals will likely be determined by politics, interest-rate expectations, and the strength of the U.S. dollar. While the dollar softened slightly during the rebound, its overall trend remains a key constraint. "Further gains in precious metals could be more muted," analysts caution, noting that the pace and sustainability of any further move will be shaped by these external forces.

The bottom line is that the volatility underscores the market's fragility. The bull run's durability hinges on whether the recent correction was a healthy pause or a sign of deeper vulnerability. For now, the technical bounce offers a reprieve, but the long-term trajectory depends on the broader macro backdrop.

The Macro Engine: Real Rates, Dollar, and Strategic Demand

The explosive 2025 bull run was not a random spike but the culmination of powerful, long-term macro cycles. The primary engine was a fundamental shift in the global monetary and trade landscape. Persistent tariff uncertainty and geopolitical friction eroded confidence in the U.S. dollar as the sole reserve anchor, directly boosting gold's appeal as a non-sovereign store of value. This was compounded by a clear trend of reduced demand for the dollar itself, a structural dynamic that has historically supported bullion.

Against this backdrop, two forms of demand acted as powerful, persistent buyers. First, central banks executed a strategic rebalancing, adding 863 tonnes of gold in 2025. While this total was below the exceptional levels of prior years, it remained historically elevated and geographically widespread. The buying was resilient even as prices surged, with net purchases in the final quarter up 6% quarter-over-quarter. This demonstrated a long-term strategic interest that is not easily swayed by short-term price noise.

Second, investor demand, particularly from ETFs, surged. Global gold ETF holdings grew by 801 tonnes in 2025, marking the second-strongest year on record. This was driven by a clear diversification and safe-haven motive, as investors sought a non-correlated asset amid economic and political stress. Total gold demand for the year exceeded 5,000 tonnes for the first time, with bar and coin demand hitting a 12-year high. The combination of record ETF inflows and robust central bank buying created a powerful, demand-led price surge.

The bottom line is that the 2025 rally was built on durable, cycle-driven forces. The shift away from dollar dominance, the strategic diversification by official institutions, and the flight to safety by private investors created a perfect storm. These are not transient factors; they represent a re-evaluation of global financial architecture that has likely entered a new phase. For the bull run to continue, these macro engines must remain engaged.

Valuation and Forward Scenarios: Targets and Constraints

The explosive 2025 rally has reset the price trajectory, but the path to new highs is now defined by a new set of constraints. Analyst projections point to a continuation of the bull case, with J.P. Morgan forecasting gold to average $5,055/oz by the final quarter of 2026, rising toward $5,400/oz by the end of 2027. The longer-term target is even more ambitious, with $6,000/oz seen as a possibility. This outlook hinges on the durability of the macro engines identified earlier: persistent geopolitical friction, a structural shift away from dollar dominance, and the strategic diversification of official reserves.

A key constraint, however, is emerging from within the demand side itself. The very success of the rally has prompted a more cautious stance from a critical buyer. As gold prices reached record highs in 2025, elevated valuations of gold reserves appeared to prompt a more cautious approach from central banks. While net purchases remained robust at 863 tonnes for the year, that total fell short of the exceptional +1,000-tonne levels seen in prior years. This suggests that at current price levels, the strategic appeal of adding more bullion is being weighed against the opportunity cost of holding such a large, non-yielding asset. The central bank buying that fueled the 2025 surge may now become a more measured, selective force.

The primary risk to this bullish scenario remains a sustained shift in the monetary backdrop. Gold's appeal is inversely related to the real yield on U.S. Treasuries and the strength of the dollar. Therefore, the metal's forward path is highly sensitive to any reversal in the trend of falling real rates or a renewed strength in the greenback. Analysts note that further gains in precious metals could be more muted if the dollar stabilizes or if interest-rate expectations shift higher. In that case, the opportunity cost of holding non-yielding gold would rise, pressuring prices even as geopolitical uncertainty persists.

The bottom line is one of high potential tempered by new friction. The macro cycle still favors gold, but the price has climbed into a zone where even its most strategic buyers are pausing. For the bull run to sustain its momentum, the supportive forces-dollar weakness, geopolitical stress, and measured central bank demand-must outweigh the rising headwinds of higher real rates and a stronger dollar. The targets are clear, but the journey to reach them will be shaped by this delicate balance.

Catalysts and Watchpoints

The durability of gold's bull run now hinges on a handful of specific events and data points. The recent rebound has provided a temporary reprieve, but the market's next decisive move will be confirmed or challenged by concrete signals from the macro and demand fronts.

First and foremost, watch the trajectory of U.S. economic data and Federal Reserve communications. The metal's path is inversely tied to real interest rates and the dollar. Any shift in the Fed's tone toward higher-for-longer policy, or a stronger-than-expected U.S. jobs report, could reignite the pressure that sparked last week's selloff. Analysts have noted that further gains in precious metals could be more muted if the dollar stabilizes or interest-rate expectations rise. Therefore, the next major U.S. economic releases, particularly those on inflation and labor markets, will be critical. The absence of the January jobs report last Friday due to a government shutdown created a data gap; the resumption of regular reporting will be a key monitor.

Second, track central bank buying reports for signs of renewed aggressive accumulation. While full-year 2025 purchases of 863 tonnes remained resilient, they fell short of the exceptional +1,000-tonne levels of prior years. This suggests elevated valuations prompted a more cautious approach. The watchpoint is whether this measured stance persists or if major holders like the National Bank of Poland, the largest buyer for the second straight year, can resume more aggressive buying as prices consolidate. Sustained net purchases above the 2010-2021 annual average of 473 tonnes would be a powerful vote of confidence in the bull case.

Finally, monitor the technical level of $5,594.82, the recent high that was broken in last week's rout. A sustained break and close above this level would signal a resumption of the primary uptrend and validate the bullish thesis. Failure to hold above this resistance, or a decisive close below the recent lows near $4,400, would indicate a deeper consolidation phase is underway, potentially extending the correction.

The bottom line is that the bull run's momentum is now in a testing phase. The catalysts are clear: monetary policy signals, official demand, and technical levels. For the cycle to continue, these factors must align to push prices decisively higher.