What is the market really trading after gold's pullback?
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Recently, the gold market has been continuously adjusting, and the disagreements over the future trend of gold prices are growing. Has the logic behind gold’s rise changed? How will central bank gold purchases, Fed policy, and the US-Iran conflict affect the gold market in the second half of the year?
In the June 8th Wallstreetcn “Master Guest Salon”, Jiang Shu, Chief Analyst of Shanghai Xirang Industrial Gold Circle, systematically shared the asset allocation logic of gold, silver, and dollar assets. Replay of the livestream → Does gold still have allocation value?
Key Points Quick View:
1. The US-Iran conflict has changed the nature of this round of gold price correction: gold is currently undergoing a mid-term pullback supported by fundamentals, not just a technical adjustment.
2. The market is retrading the logic chain “oil price → inflation → Fed”; the Fed is regaining its pricing power over gold.
3. Central bank gold buying determines gold’s long-term price center, not the price fluctuations over the next few months.
4. The gold bull market is not over, but the future trend is more likely to be a volatile upward movement, rather than a unilateral surge like last year's.
5. The silver bull market is still ongoing; investors can understand silver either as “gold and silver are inseparable” or “copper and silver are inseparable.”
6. Medium-term positive for the dollar and negative for gold; long-term positive for gold.
I. Russia-Ukraine conflict is “adding fuel to the fire,” US-Iran conflict is “a bolt from the blue.”
Host: Since the US-Iran conflict, why has gold prices been relatively flat?
Jiang Shu:
Many investors think that after the outbreak of the US-Iran conflict, gold, as a safe haven asset, should continue to rise. But in reality, the relationship between gold and oil prices is not as simple as people imagine.
During the brewing and initial explosion of a conflict, gold and oil prices do rise together, as the market trades on risk-aversion sentiment. Both the 2022 Russia-Ukraine conflict and the current US-Iran conflict have shown this characteristic.
But entering the second stage, the market focus shifts from risk aversion to inflation and monetary policy. At this time, rising oil prices increase worries about inflation, and this in turn affects market expectations for Fed monetary policy. Thus gold and oil often show an inverse relationship: when oil prices rise, the market worries rate cuts will be postponed, pressuring gold; when oil prices fall, rate cut expectations improve and gold gets support.
This US-Iran conflict is also distinctly different from the 2022 Russia-Ukraine conflict. Before the Russia-Ukraine conflict, US inflation and oil prices were already on an upward trend, so the conflict was “adding fuel to the fire.” But before the US-Iran conflict, US inflation was not high and oil prices were rather subdued, so its impact on inflation and policy expectations was “a bolt from the blue.”
Originally, the market thought the gold pullback after the surge in Q1 this year was mostly technical. But the US-Iran conflict changed this logic. Inflation pressures from rising oil prices have made the market re-evaluate the Fed’s rate cuts path, turning the pullback from a short-term technical one into a mid-term correction supported by fundamentals.
Thus, the current weak performance of gold prices is not entirely because of issues with gold itself, but because the market has started retrading the “oil price → inflation → Fed” logic chain. In other words, after the US-Iran conflict broke out, the previously believed expectations of rate cuts started loosening. Gold is facing a mid-term correction affected by both inflation and monetary policy expectations, not just a technical adjustment.
II. The Fed is regaining its pricing power over gold
Host: Will oil prices, inflation, and Fed policy become the most important variables affecting gold in the second half?
Jiang Shu:
The gold market in 2025 has two very distinctive features.
First, traditional pricing factors have been clearly marginalized. The market used to explain gold prices using the dollar, real dollar interest rates, and Fed policy; but in over 65% of gold's price rise in 2025, only about 10%-15% is directly related to the Fed. Trump 2.0, reciprocal tariffs, US government shutdown, the Greenland event, and geopolitical tensions are the main drivers of gold's rise.
Second, the slope of the gold price rise far exceeds market expectations. In fact, almost all mainstream institutions were bullish for gold at the end of 2024, so continued gold price rises were not surprising; what exceeded expectations was the size and speed of the rise. The market underestimated Trump 2.0's impact on global financial markets.
But entering 2026, things are starting to change.
Last year, the impact of US economic data on gold prices was not obvious; but this year, the market is once again focusing on US economic data, inflation, and Fed policy. Strong US economic data and weaker rate cut expectations often directly cause stage corrections in gold.
An important reason is that the US-Iran conflict has changed the market’s view on inflation. With oil prices staying high, the market is once again worrying about inflation pressures, and thus focusing back on the Fed’s policy path.
Therefore, the main storyline in the gold market for the second half has changed.
Before the US-Iran conflict broke out, the market mostly traded “Trump 2.0”; now, gold pricing is gradually returning to “Trump 2.0 and Fed equally important.” In other words, the Fed is regaining its pricing power over gold.
This means gold’s future trend may show two key features:
First, volatility will increase significantly. Gold may return to the 2023 operating mode, with repeated swings based on changes in economic data, inflation, and rate cut expectations, no longer the one-way upward market seen in 2025.
Second, the slope of the rise may slow. It will be hard to repeat last year’s rapid, large rises—gold is more likely to trend upward in a volatile manner.
For investors, besides continuing to focus on Trump’s policies, the most important things to watch are US economic data, Fed meetings, and changes in future monetary policy paths.
III. Central bank gold buying determines the price center, not short-term ups and downs
Host: The Chinese central bank has now increased gold holdings for 19 consecutive months, but some say global central banks are slowing gold purchases. What stage is central bank gold buying at? If it slows in the future, will this pressure gold prices?
Jiang Shu:
Central bank gold buying is not a phenomenon unique to recent years.
In fact, around 2010, global central banks switched from net selling to net buying gold. By 2024, with gold and the dollar, real dollar interest rates moving up together, the traditional analytical framework failed, and the market began paying more attention to central bank gold buying's impact on gold prices.
But in my opinion, central bank gold buying is more suitable for explaining gold’s long-term value, not its short-term trend.
Central bank gold buying, local currency oversupply, and changes in the dollar’s dominance in the international monetary system together push gold’s price center higher. The last gold bull market’s price center was about $1,000–$1,500, while this round has risen to $4,000–$5,000, due in part to continuous central bank gold buying.
But using central bank gold buying to predict price movements in the next few months has inherent flaws.
First, central bank gold buying data is lagged. The market usually sees last month's data, and investors can't anticipate future purchase rhythms of various central banks in advance.
Second, central bank gold buying and gold prices may not always be synchronized in the short term. Even if gold prices see a stage correction, central banks may keep buying gold. For example, after the 2022 Russia-Ukraine conflict, international gold saw nearly a 20% correction, but global central bank gold buying was actually accelerating during that period.
Thus, central bank gold buying is more like a long-term bullish factor than a short-term trading indicator.
It explains why gold’s price center in a new bull market is always higher than the last, and why many long-term gold holders eventually see good returns.
But for judging gold price movements over the next few months, US economic data, Fed policy path, and inflation changes are often more worth watching than central bank gold buying.
IV. “Gold and silver are inseparable” or “copper and silver are inseparable”?
Host: What’s your view on silver? Will it follow gold, or is there an independent investment opportunity?
Jiang Shu: There are two natural lines of reasoning for studying silver.
The first is “gold and silver are inseparable.”
Under this framework, silver is treated as a precious metal, with gold as the core research subject. When gold bull markets continue, silver bull markets continue; when gold bull markets end, silver bull markets also end. Historically, since 1973, gold and silver have been highly correlated, so this framework still holds.
The second is “copper and silver are inseparable.”
Because silver has much greater industrial attributes than gold, many investors analyze silver in the context of industrial metals, viewing it from the perspectives of new energy, photovoltaics, computing power, and industrial demand. Large price swings in silver in recent years can definitely be explained by changes in industrial demand.
Interestingly, neither of these frameworks have been disproven by the market long-term.
You can use gold or copper to explain silver. So for investors, the most important thing is to choose the framework you’re familiar with. If you’re good at macro and precious metals, use the “gold and silver are inseparable” logic; if you’re familiar with the non-ferrous metals chain, analyze with the “copper and silver are inseparable” logic.
As of now, I still lean towards gold’s overall trend continuing. With the gold bull market continuing, so too is the silver bull market.
Although silver has recently seen a sharp correction and many investors recall 2011 when silver peaked before gold, the macro environment now is different. 2011 was in a post-financial crisis recovery cycle; the current global economic environment is very different.
So, simply using price patterns to compare to 2011 is not sufficient. As long as gold’s long-term trend isn’t over, silver will still follow gold’s trend.
V. Look at the dollar for the next 6 months, look at gold after 6 months
Host: If you could only choose between gold, the dollar, US stocks, etc. in the next 6–12 months, how would you rank them? Is gold still your first choice?
Jiang Shu:
If I confine the time frame to the next 6 months, I would not prioritize gold allocation.
The reason is simple. There is still substantial uncertainty in oil prices, and in year-over-year terms, US inflation pressures are unlikely to dissipate quickly in the short term. Though these inflation pressures aren’t enough for the Fed to hike again, they are sufficient to further push back rate cut expectations.
Against this backdrop, the dollar is relatively strong in the short term, with gold likely in a volatile or correction phase. For ordinary investors, whether allocating to gold ETFs or physical gold, they need to be prepared for temporary paper losses.
Therefore, for the next 6 months, I’d prioritize dollar assets and underweight gold.
But if I extend to more than 6 months, my outlook on gold is much more optimistic.
One scenario is the US economy finally weakening or even entering a crisis. In the short term, this hits most risk assets; but historically, after a crisis comes aggressive rate cuts and loose liquidity, which is the best environment for gold.
Another scenario is the US successfully entering a new AI-driven economic cycle, maintaining resilience. In this case, the US-Iran conflict delays the rate cut cycle’s start but lengthens the whole period. In the long run, this also favors the continuation of the gold bull market.
Therefore, regardless of the scenario, I believe the gold bull market is not over.
The effect of the US-Iran conflict on gold is, essentially:
Medium-term positive for the dollar, negative for gold; long-term positive for gold.
For some time ahead, gold may still see adjustments. But as inflation pressures ease and the market returns to trading rate cut expectations, gold may reach new highs after corrections.
For investors, a more reasonable strategy might not be to greatly increase gold allocations now, but to gradually hike gold allocations during future corrections.
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