Gold’s recent pullback may continue, as technical and macroeconomic indicators point to an extended consolidation phase rather than a rapid recovery, according to Bank of America Group technical strategists.
The XAU/USD pair rose 2.6% yesterday, and gold futures also climbed, though they are now up less than 4% year-to-date.
Why is gold falling?
Macroeconomic forces are weighing on the precious metal. BCA strategist Peter Berezin pointed to three main drivers behind gold’s recent weakness. First, the US dollar strengthened as interest rate expectations rose.
“From a macroeconomic perspective, a stronger dollar and higher interest rates are generally bad news for gold,” Berezin said.
Second, positioning played a role. Gold—and especially silver—entered March in overbought territory. In such conditions, bouts of risk aversion can trigger sharp declines as leveraged or short-term investors unwind their positions. Berezin noted that similar dynamics have been seen in the past, including in October 2008, when gold fell sharply despite broader market pressures.
Third, official sector demand appears to be shifting. Some central banks are reducing purchases or even selling reserves. Poland is reportedly considering selling gold to finance defense spending, while Turkey has been selling gold to support its currency. There are also signs that some Gulf states may be slowing purchases amid weak export revenues.
Overall, the combination of technical consolidation, tighter financial conditions, and weaker central bank demand suggests that gold may remain under pressure in the coming quarters, even after its strong multi-year run.
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