|

Gold’s “healthy” reset — The parabola pauses, not ends

When the parabola breathes

Gold’s latest stumble isn’t the end of a story — it’s the breath between chapters.

The market initially pulled back to the 4,000 zone, where gold found itself less in crisis and more in a state of recalibration. After doubling from $2,000 to over $4,000 in barely five years — and vaulting from $3,300 to $4,300 in just sixty days — something had to give. What followed wasn’t panic; it was physics. Parabolas can only stretch so far before gravity reminds them of balance. The move looked violent on screens, but under the hood, this was a pressure release — the market taking a deep breath after sprinting too fast for too long.

The five-percent downdraft that lit up trading desks from Shanghai to New York wasn’t the work of dark conspiracies or coordinated ambushes. It was the silent inevitability of leverage meeting code. Short-dated GLD options rolled off, triggering a cascade of systematic selling through high-frequency channels. Once the first margin light blinked, the machines took over — selling first, recalculating later. Yet for all the chaos, the underlying structure held firm: GLD holdings slipped only 0.6%, open interest barely twitched, and Prime Broker specs weren’t anywhere near stretched. That’s really what’s so confusing about the sell-off… no one who owned gold in size appeared to be selling!!! Folks may have rebalanced like I did. Hence, the humans didn’t lose their conviction; the algorithms simply flushed excess momentum out of the plumbing. It wasn’t malice — it was math.

.But the math still points north. Central banks haven’t even come close to satisfying their appetite. Many still hold less than 10% of reserves in gold, leaving roughly 2,650 tonnes of latent demand waiting quietly on the sidelines. If that buying spree comes to fruition, the math is staggering.

In early 2023, Goldman Sachs’ commodities team — then led by Jeff Currie — published a quantified study on how central-bank gold demand translates into price action, effectively putting numbers around the impact of official-sector buying on bullion’s trajectory.

Chinese buying continues methodically as ever, ETF inflows remain sticky, and the macro backdrop is tilting back in bullion’s favour. The Federal Reserve, after two years of draining liquidity like a desert wind, is now leaning toward a more forgiving stance on QT. Markets are beginning to price in up to 125 basis points of easing over the next 15 months, and with Trump expected to appoint a dovish Fed Chair, the rate landscape looks set to soften further. Real yields are peaking, liquidity QT leaks might meet their maker next week, and the narrative is turning towards fire hose accommodation.

In that kind of world, gold doesn’t need a crisis to rally — it just needs time. The erosion of fiat trust is no longer a dramatic collapse; it’s a quiet leak. Confidence is wearing thin at the edges of the bond market, which is losing its safe-haven halo. The dollar’s dominance is less commanding now, and investors — especially those who remember that trust is the real currency — are migrating back toward tangibles. The machines may have finished their forced selling, but the real buyers — central banks, sovereign funds, long-term allocators, and, I should add, retail. — are likley to step in again.

Every great bull run pauses like this: momentum gives way to digestion, leverage clears, and conviction quietly reshuffles. The parabola hasn’t died; it’s catching its breath. The structure remains intact, the story unbroken. Gold didn’t fall because belief vanished — it fell because the market needed to shake off its sugar high. And when the Fed’s easing cycle gathers pace and the liquidity tide turns, the metal will do what it’s done for centuries: rise — not in panic, but in quiet confidence — as the sheen of paper promises fades once again into dust.

Author

Stephen Innes

Stephen Innes

SPI Asset Management

With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.

More from Stephen Innes
Share:

Editor's Picks

EUR/USD flirts with daily highs, retargets 1.1900

EUR/USD regains upside traction, returning to the 1.1880 zone and refocusing its attention to the key 1.1900 barrier. The pair’s slight gains comes against the backdrop of a humble decline in the US Dollar as investors continue to assess the latest US CPI readings and the potential Fed’s rate path.

GBP/USD remains well bid around 1.3650

GBP/USD maintains its upside momentum in place, hovering around daily highs near 1.3650 and setting aside part of the recent three-day drop. Cable’s improved sentiment comes on the back of the Greenback’s  irresolute price action, while recent hawkish comments from the BoE’s Pill also collaborate with the uptick.

Gold clings to gains just above $5,000/oz

Gold is reclaiming part of the ground lost on Wednesday’s marked decline, as bargain-hunters keep piling up and lifting prices past the key $5,000 per troy ounce. The precious metal’s move higher is also underpinned by the slight pullback in the US Dollar and declining US Treasury yields across the curve.

Crypto Today: Bitcoin, Ethereum, XRP in choppy price action, weighed down by falling institutional interest 

Bitcoin's upside remains largely constrained amid weak technicals and declining institutional interest. Ethereum trades sideways above $1,900 support with the upside capped below $2,000 amid ETF outflows.

Week ahead – Data blitz, Fed Minutes and RBNZ decision in the spotlight

US GDP and PCE inflation are main highlights, plus the Fed minutes. UK and Japan have busy calendars too with focus on CPI. Flash PMIs for February will also be doing the rounds. RBNZ meets, is unlikely to follow RBA’s hawkish path.

Ripple Price Forecast: XRP potential bottom could be in sight

Ripple edges up above the intraday low of $1.35 at the time of writing on Friday amid mixed price actions across the crypto market. The remittance token failed to hold support at $1.40 the previous day, reflecting risk-off sentiment amid a decline in retail and institutional sentiment.