Gold Market Trends: Precious Metals Amid Global Uncertainty

Is the gold bull catching its breath, or is it over?

Gold is generally considered a safe-haven asset, typically shining when the economy runs too hot or too cold.

By Xu Xiaoqing Chief Macro Strategist, Dunhe Asset Management Co., Ltd.

Since the start of 2025, gold has climbed steadily from around $2,600 an ounce, at one point approaching $4,400 — a peak gain of nearly 69% for the year. But from October 20, it slid to as low as $3,900 within six trading days, a drop of 11%. Either this gold bull market has ended, or this is merely a pause for breath.

History offers two great gold bull markets: 1970–1980 and 2001–2011, each lasting roughly a decade, with cumulative gains of about 23x and 7x respectively. The current run began in the second half of 2018 from around $1,200 an ounce and has already tripled. Judged against the ten-year cycle standard of past bull markets, this one may already be two-thirds complete.

In the traditional pricing framework, gold moves inversely to real dollar interest rates, and real rates are driven mainly by two factors: the nominal rate set by Treasury yields, and inflation expectations as proxied by crude oil. In low-inflation times, real and nominal rates move largely together, and the anchor for gold pricing is Treasuries; in high-inflation times, inflation expectations weigh more heavily on real rates — and the anchors for gold pricing are still Treasury yields and oil prices.

During the high-inflation 1970s, gold rose in lockstep with oil even as the Fed hiked rates aggressively. In the 2000s, falling rates became the main driver of gold’s rise, and oil was not weak in that period either. The current bull market, however, is hard to explain with the old framework: since 2018, pushed along by Fed hikes, Treasury yields have ratcheted steadily higher, while oil has only spiked episodically when geopolitical conflicts intensified and lacks any sustained upward momentum. By rights, neither Treasuries nor oil should support a big gold rally.

Gold is generally considered a safe-haven asset, typically shining when the economy runs too hot or too cold. In the 1970s, inflation ran out of control and gold hedged stagflation risk; in the early 2000s, the dot-com bubble crisis and the subprime crisis struck the US in turn, and gold hedged recession risk. US equities fared poorly in both periods, swinging in wide ranges, which is why gold and US stocks have historically shown little correlation. Yet in this bull market, from its 2018 launch to now, gold and US equities have risen together — a rare sight. That makes the current climb in gold hard to explain with simple safe-haven logic.

What is the core driver behind gold’s surge? The pattern I find is that all three bull markets shared one trait: each fell within a US fiscal expansion cycle, and government credit ultimately translated into extraordinary money creation. Broadly, three features stand out. First, the deficit ratio rose markedly in all three, reaching above 5%. Second, except for the Fed’s tightening during the high-inflation 1970s, monetary policy held a broadly accommodative stance in the latter two rounds. Third, combined fiscal and monetary easing sharply lifts broad money (M2) growth — during fiscal-expansion phases, average M2 growth typically runs about 3 to 5 percentage points higher than in periods without fiscal expansion. On the whole, fiscal expansion is the most important foundation for gold’s strength; layered with monetary easing, it amplifies the liquidity effect and becomes the key that breeds a gold bull market.

If fiscal stimulus is the foundation of gold’s rise, then gold bull markets also tend to end when the fiscal expansion cycle does. In early 1980, the Fed jacked its benchmark rate up to 20% to tame high inflation, driving up the government’s debt-financing costs; fiscal expansion, hemmed in by that cost, could not continue, and the first gold bull market ended with it. The second gold bull market ended more because political deadlock placed a hard constraint on fiscal space.

In my view, this round of fiscal expansion has slowed at the margin, but with the deficit ratio still above 5%, the foundation of gold’s long-term bull market remains in place. In September the Fed restarted its rate-cutting cycle and will end balance-sheet runoff in December. If US economic growth slows going forward, monetary policy has room to keep easing on both the price and the quantity fronts — especially since the new Fed chair taking office in 2026 will be more dovish than Powell, and may start a new round of balance-sheet expansion while continuing to cut rates, opening a fresh leg up for gold. But there is one possibility: if Republicans lose the 2026 midterms and control of both the Senate and the House, fiscal expansion could well become unsustainable, much as it did in Obama’s second term, and the gold bull cycle would end early accordingly.

The long-term bull logic for gold is unchanged, but the short-term correction may not be over; until a new catalyst appears, prices will mostly trade in a wide range.

Four factors are pressuring gold in the near term. First, fiscal policy is tightening at the margin. Second, inflation pressure is on a slowing trend. Third, valuation stress is showing: the ratio of gold to US M2 has hit a near-40-year high, over-extending liquidity expectations, and the technicals call for a correction. Fourth, central bank gold buying has weakened somewhat. Purchases for full-year 2025 are expected around 800 tonnes, clearly below the 1,000-plus tonnes a year recorded from 2022 to 2024 — a sign that sky-high prices have slowed the pace of central banks’ allocations.