The recent pullback in gold may continue, as technical and macroeconomic signals indicate a prolonged consolidation phase rather than a quick rebound, according to technical strategists at Bank of America.
XAU/USD rose by 2.6% yesterday, gold futures also increased, although they have added less than 4% since the beginning of the year.
Why is gold falling?
Macroeconomic factors are weighing on the precious metal. BCA strategist Peter Berezin pointed to three main factors behind the recent weakness in gold. Firstly, the US dollar has strengthened, and expectations for interest rates have risen.
«From a macroeconomic perspective, a stronger dollar and higher rates are generally bad news for gold», noted Berezin.
Secondly, positioning has played a role. Gold — and especially silver — entered March in an overbought state. In such conditions, episodes of risk appetite decline can trigger sharp drops as leveraged investors or short-term investors exit positions. Berezin noted that a similar dynamic was observed in past episodes, including October 2008, when gold fell sharply despite overall market stress.
Thirdly, demand from the official sector seems to be changing. Some central banks are cutting purchases or even selling reserves. Poland is reportedly considering selling gold to fund defense spending, while Turkey is selling gold to support its currency. There are also signs that some Gulf states may be slowing purchases amid declining export revenues.
In aggregate, the combination of technical consolidation, tightening financial conditions, and weaker demand from central banks suggests that gold may remain under pressure in the coming quarters, even after its strong multiyear growth.
BofA sees more downside risks
Strategist Paul Chiana stated that the yellow metal appears to be in a corrective phase of the «fourth wave» — a pattern that typically follows a strong rally and may last several months.
«Price patterns and impulse signals indicate that gold remains in the fourth wave consolidation phase», he wrote, adding that the structure «could reasonably persist through the second quarter and into the third quarter».
This suggests that gold may struggle to regain its previous highs in the near term. The inability to hold the January peak reinforces expectations of range-bound trading with a downward bias.
Chiana reported that the bank sees risk towards the $4,000 level, with the 50-week moving average currently around $3,967 acting as a key technical reference point. Given the scale of the previous gold rally, a deeper pullback would not be unusual, he noted.
Prices have risen from around $1,810 at the end of 2023 to nearly $6,000 at the beginning of 2026. In this context, Chiana stated that «a pullback to $3,700 would not be unusual», describing it as consistent with a standard correction after such a strong rise.