Gold prices (GC=F) stabilized on Wednesday after the worst intraday decline in more than 12 years, but one of this year’s strongest rallies remained largely on hold.
Futures for the yellow metal swung between negative and positive territory to hover around $4,120 per troy ounce after falling 5.5% in the previous session as investors took profits and the US dollar strengthened.
Before the sharp sell-off, gold had risen a whopping 65% year-to-date on strong demand from global central banks and investors’ flight to the safe-haven asset as a hedge against falling fiat currencies in the so-called debasement trade. Wall Street strategists had warned of overbought conditions.
“We have highlighted the potential for volatility given the scale and speed of the rally, but we believe precious metals should remain supported by a combination of macro, fundamental and momentum-driven factors,” Ulrike Hoffmann-Burchardi, chief investment officer for the Americas region at UBS, wrote on Wednesday.
Read more: Are you thinking of buying gold? Here’s what investors need to keep in mind.
Further rate cuts expected from the Federal Reserve this year, coupled with rising demand for precious metals and ongoing political uncertainty, should continue to be a tailwind for the commodity heading into the first quarter of 2026, the strategist said. He noted that real interest rates in the United States could fall below zero, given the stickiness of inflation, and that could make the US dollar less attractive to investors, thus boosting flows into precious metals.
“We continue to view gold as an effective portfolio diversifier, and further gains towards our bullish case of $4,700/oz are still possible should adverse macroeconomic and political developments emerge,” Hoffmann-Burchardi wrote.
The pause in gold’s rally could signal rotation opportunities for bitcoin (BTC-USD), which has been trying to stabilize after a volatile two-week period, Fundstrat digital asset strategist Sean Farrell said on Wednesday.
The world’s largest cryptocurrency fell about 3% on Wednesday to hover around $108,000 per token, reversing a three-day rally.
“I don’t think it’s a coincidence that at the time we saw gold drop, we saw bitcoin bounce back pretty violently,” Farrell said Tuesday night.
Bitcoin rose from around $107,000 last Friday to a session high of $113,000 on Tuesday, sparking renewed optimism that the cryptocurrency’s recent decline may be behind it.
The strategist pointed out that in recent years both assets have had a relationship of advance and delay.