Gold prices have climbed above $4,600. Is the metals bull market back?

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Gold prices surge then retreat: After the sharp rally, is it a short-term correction or a trend reversal?

The gold market in August resembled a train that suddenly accelerated and then braked sharply.

On August 19, the U.S. Treasury announced an expansion of its repurchase facility to support long-term Treasury liquidity, raising the single-repurchase cap for 10- to 20-year and 20- to 30-year Treasuries from $2 billion to at least $4 billion. The adjustments are scheduled to take effect on September 9.

Following the announcement, long-term U.S. Treasury yields retreated, the U.S. dollar weakened in tandem, and gold prices surged rapidly. Spot gold broke through $4,500 per ounce and maintained its momentum over the next few trading sessions; COMEX gold futures briefly surpassed $4,755, while London spot gold touched a high near $4,696.$XAU/USD (XAUUSD.CFD)$

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However, during certain trading hours on August 25, the gold rally cooled significantly. London spot gold fell back to around $4,649 per ounce, hitting an intraday low of $4,617; domestic gold quotes also experienced a pullback after reaching highs.

After the rapid ascent, is this pullback merely short-term profit-taking, or does it signal a shift in the trend?To answer this question, one cannot rely on a single candlestick chart but must re-examine the core logics driving both the rise and the correction in gold prices.

1. The Primary Driver: The Treasury's expansion of long-term bond repurchases triggers a reassessment of U.S. Treasury liquidity and fiscal risks

To understand this surge in gold prices, it is helpful to first observe the fiscal risk premium and liquidity shifts reflected in the long-term U.S. Treasury market. Although the Treasury's August 19 announcement to expand long-term bond buybacks is essentially a routine tool for optimizing debt structure and supplementing liquidity, the market is more concerned with the underlying fiscal pressure it reveals amid continuously rising U.S. debt levels. Gold carries no sovereign credit risk, so it typically attracts attention when concerns about fiscal sustainability rise. This rally may not only be related to short-term fluctuations in yields and the U.S. dollar but also reflects a market reassessment of long-term fiscal deficits, monetary credibility, and asset allocation risks.

Of greater concern is the follow-up news from August 24:According to CNBC, the Treasury is considering utilizing the Treasury General Account (TGA), which holds nearly $1 trillion, to fund the expanded bond repurchase program.

The implications of this event for gold go far beyond the simple narrative of "falling yields leading to rising gold prices."

The Treasury's actions have heightened market focus on U.S. Treasury liquidity, fiscal dominance risks, and long-term financing costs, but this cannot yet be directly defined as debt monetization.

GoldIts advantage in this environment lies in the absence of credit risk from a sovereign issuer and its relatively slow supply growth. When investors worry about fiscal discipline, monetary credibility, or long-term inflation, gold typically sees increased allocation demand.

However, the current rally in gold prices is not driven solely by the Treasury's announcement.Fed policy expectations, fluctuations in the U.S. dollar, economic data, geopolitical risks, technical breakouts, and short covering may have also amplified the market move.

II. The Second Driver: A Subtle Shift in Fed Policy Expectations

All else being equal, a decline in real interest rates is generally favorable for gold, as holdingnon-yielding goldbecomes less costly in terms of opportunity cost. However, this relationship is not a stable one-to-one correlation; the U.S. dollar trend, safe-haven demand, central bank gold purchases, and positioning also influence gold prices.

The main divergence currently between gold and Fed policy expectations lies in the fact that some officials continue to emphasize inflation risks, while the market is reassessing the probability of future rate hikes following weakening employment data.Although three FOMC members advocated for a rate hike at the July meeting, signaling a strengthening of hawkish forces within the committee, the subsequent weak July non-farm payrolls and slowing CPI indicated that the market has adjusted its expectations for the future path of rate hikes. Market traders are now betting:Under the dual pressure of a slowing real economy and rising fiscal interest burdens, the Federal Reserve's hawkish stance is unlikely to be sustainable.

This expectation gap, with officials leaning hawkish while the market leans dovish, creates the most favorable environment for gold—

· Ifthe market believes there is a high probability of future rate cuts, and inflation expectations do not decline by the same magnitude, real interest rate expectations may fall, thereby supporting gold.

· But ifrate cut expectations are accompanied by a rapid decline in inflation,、leading to a stronger US dollar or improved risk appetite,gold's actual performance may still fall short of expectations.

The true window for validation falls on August 28.

Federal Reserve Chair Walsh will deliver his inaugural keynote address since assuming the chairmanship at the Jackson Hole Global Central Bankers Symposium. This is the most significant event for global markets this week.

Third Driver: Global central banks are advancing reserve diversification and continuously increasing their gold allocations.

If the first two drivers are "short-term catalysts," then central bank gold buying is the "structural foundation" of this market rally.ballast"。

The People's Bank of China increased its gold holdings by approximately 20 tonnes in July,marking the 21st consecutive month of additions.This is not short-term market timing, but rathera systemic adjustment to the structure of reserve assets.

The latest survey data from the World Gold Council further illustrates this point:

Central bank gold purchases differ fundamentally from those of retail investors:They do not focus on short-term price fluctuations but rather execute a structural shift in reserve assets.

What these data reflect isnot merely a gold investment frenzy, but a shift in the logic behind global reserve asset allocation.As more central banks anticipate a decline in the share of USD reserves and include gold in their accumulation plans, it implies thatgold is gradually transitioning from a cyclical investment instrument back to its role as a strategic reserve asset.For gold prices, this does not necessarily mean sustained sharp gains in the short term, but it does indicate that the long-term demand foundation is being steadily strengthened, with the price floor and value中枢 (central value axis) of gold expected to be systematically lifted.

4. The Fourth Driver: ETF Capital Shifts from "Voting with Their Feet" to "Rushing In"

Central banks serve as the "ballast stone," while ETFs and speculative capital are the "accelerator"。

From a global perspective on overall holdings,Gold ETFs After experiencing consecutive net outflows in the earlier period, the pressure of outflows significantly eased starting in July, with substantial net buying seen in August. Global gold ETFs recorded a single-day net increase of 18 tonnes this month, marking the largest single-day gain in nearly a year; weekly inflows approached $6.4 billion, with overall new holdings exceeding 40 tonnes, demonstratinga strong rebound trend in institutional allocation funds.

The shift in ETF fund flows from net outflows to net inflowsis a significant signal change,indicating a recovery in financial investment demand for gold.

5. How is this round of correction different from last year?

Many investors ask: Gold prices also surged last year, so what is different about this round this year?

There are three key differences:

· The driving force has shifted from "single expectation of rate cuts" to "multi-factor resonance." Unlike the previous rally, which centered largely on the Fed's policy pivot, the current market is simultaneously pricing in fiscal risks, central bank gold purchases, shifts in ETF flows, and geopolitical factors, making the drivers appear more diversified.

· ETF fund flows have shifted from a headwind to a tailwind. Gold ETFs saw sustained outflows earlier, which temporarily weakened financial investment demand; however, recent inflows have provided additional momentum for the current rally. That said, ETF holdings comprise both long-term allocation capital and short-term trend-following funds.

· The trend of central bank gold buying has become clearer. After 21 consecutive months of increases, with the People's Bank of China planning to continue adding to its reserves over the next year, this consistent buying suggests that reserve diversification is a long-term strategy. However, central bank gold purchases remain subject to gold prices, changes in foreign exchange reserves, balance of payments, and policy objectives, so the monthly pace may exhibit significant volatility.

6. Current Risks: Three Variables That Cannot Be Ignored

Reflecting on the pullback on August 25, while maintaining a bullish stance, it is crucial to stay clear-headed. The following three risk factors cannot be overlooked:

1. A 'hawkish surprise' at the Jackson Hole Annual Symposium. Christopher Waller's speech on August 28 represents the biggest source of uncertainty recently. If he sends strong anti-inflation signals, market expectations for a September rate hike could reignite, putting further short-term downward pressure on gold prices. Goldman Sachs also warns that gold's uptrend faces greater two-way volatility risk. Meanwhile, Citigroup has raised its 0–3 month gold price target to $4,800, while maintaining its 6–12 month target at $5,000.

2. Diverging logic between traders and allocators in the face of the pullback. The pullback on August 25 may be attributed to significant short-term gains, profit-taking, and position reduction ahead of key events. Short-term traders should naturally remain alert to heightened volatility surrounding the Jackson Hole Symposium. However, for long-term allocators, it is crucial to clearly distinguish between short-term technical corrections and medium-to-long-term allocation logic. If medium-to-long-term fundamentals—such as fiscal risks, central bank gold purchases, and real interest rates—do not show a significant reversal, short-term drawdowns can serve as an observation window for long-term investors to reassess their allocation ratios.

3. High prices have suppressed demand for gold jewelry and certain segments of physical consumption.High gold prices have significantly dampened physical consumption. The World Gold Council’s Q2 report indicates that in a high-price environment, gold consumption in China has shown clear stratification, with lighter-weight products becoming the new favorite. If gold prices continue to rise rapidly, physical demand in Asia may weaken further, creating some resistance at the top.

🏦 The value of gold has never been about trying to time the top or bottom

Was the pullback on August 25 driven by short-term profit-taking, or does it signal a market peak?

From a broader macro perspective, rather than fixating on when gold prices will peak, it is more productive to consider a more critical question:In a world characterized by $40 trillion in debt, ongoing central bank de-dollarization, and a downward shift in the中枢 of real interest rates,Does your portfolio need to allocate a certain proportion to assets that do not rely directly on the credit of a single sovereign issuer?

Gold itself does not generate cash flow, so it is not a "yield-bearing asset"; however, it does not default and cannot be diluted through printing—this is precisely its core value in times of uncertainty. Short-term technical overbought corrections and medium-to-long-term allocation logic are issues on two different levels.

If your portfolio does not yet include gold, every pullback driven by sentiment and technical factors may present an opportunity to revisit your allocation ratio. If you already have sufficient exposure, you might as well sit back and observe the turbulence—gold has never been meant for "speculative trading," but rather for serving as a foundational "anchor" in your portfolio.

The Jackson Hole Annual Symposium on August 28 is the next key milestone.

The value of gold lies not in speculating on the next rally or pullback, but in providing long-term risk hedging and asset allocation benefits for a portfolio. For investors seeking convenient exposure to gold,3081 Value Gold ETF $Value Gold ETF (03081.HK)$it may be worth keeping on your radar.

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Sources: CNBC reports from August 2026 regarding US Treasury debt buybacks and TGA fund arrangements; Reuters reports from August 2026 on gold prices, ETF flows, and institutional views; World Gold Council's "2026 Global Central Bank Gold Reserves Survey" from June 2026; World Gold Council's "China Gold Market Monthly Review: Strong Official Sector Buying in July" from August 2026; World Gold Council's "Gold Demand Trends: Q2 2026" from July 2026; public data from the Federal Reserve, US Department of the Treasury, and US Bureau of Labor Statistics; WIND and public market data.

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