Gold is on the brink of an unprecedented eighth consecutive monthly gain, a streak that would mark its longest in history. However, several headwinds threaten to disrupt the rally.
While investors have flocked to the metal as a safe haven amid macroeconomic uncertainty, market strategists warn that the rally may be reaching a critical point.
Historic gold rally faces unprecedented risks
Moody’s Analytics Chief Economist Mark Zandi warns that financial markets are feeling increasingly tense and that the elements are coming together for a significant sell-off.
This threat, he says, is greatest for stocks and corporate bonds, but even cryptocurrencies, gold and silver remain at risk despite recent pullbacks.
“Valuations are high…investors are simply investing in the faith that prices will rise rapidly in the future, as they have in the recent past,” Zandi said.
The economist points to mixed economic fundamentals as a source of tension. America’s real GDP is growing just over 2%, below the economy’s potential of about 2.5%. Meanwhile, employment has stagnated and unemployment continues to rise.
Inflation, measured by the Federal Reserve’s preferred consumer spending deflator, remains stubbornly and uncomfortably high at 3%.
Meanwhile, renewed tariff chaos and the looming threat of conflict with Iran offer little upside for risk assets.
The Treasury market adds another layer of uncertainty. Zandi warns that leveraged hedge funds have entered a fragile market left by the retreat of the Federal Reserve and global investors.
“It’s not hard to imagine them running for the proverbial door all at once and interest rates skyrocketing,” he said.
Huge budget deficits and questions about the safe-haven status of Treasuries in a deglobalizing world exacerbate the risk.
Despite these obstacles, gold continues to attract investors as a durable store of value. Kalshi data shows the metal is on track for its eighth consecutive green month.
Meanwhile, Bank of America strategist Michael Hartnett advises trading oil for short-term geopolitical gains, but “owning gold” for longer-term security.
Central banks now have more gold than US Treasuries in reserves for the first time since 1996, reflecting their role as a hedge against fiat currency risk.
China’s gold shortage causes supply crisis amid historic rally
The gold shortage in China following the Chinese New Year is also adding bullish momentum, although it carries its own risks.
Reports indicate that many gold shops suspended bullion sales and refunded pre-holiday contracts due to severe supply constraints.
Analysts suggest this could push gold towards $10,000 per ounce in extreme scenarios, although abrupt market reactions may trigger short-term corrections.
“Extremely severe gold shortage that will soon see gold hit $10,000 an ounce!” Silver Trade pointed out.
Technical analysts also remain cautious. Rashad Hajiyev sees resistance near $5,160. Meanwhile, the FXGold analyst highlights the critical gap at $5,100, suggesting that an opening below this level could favor sellers and limit buying momentum.
In short, while gold’s historic run remains intact for now, investors face a delicate balancing act between rising demand, geopolitical uncertainty, fragile markets and key technical levels.
The combination of these factors means that the metal’s next moves could be as volatile as they are historic.
