Time to buy gold?

The long-term bull case for gold remains intact, despite the aggressive 27% retracement from January's high of $5,595/oz to around $4,050/oz — a classic entry point for structural investors, though short-term headwinds persist. The primary pressure stems from a hawkish Federal Reserve under Kevin Warsh, where a "higher-for-longer" stance and sticky 4.2% inflation have boosted real yields and the dollar. Geopolitical tensions in the Middle East have driven energy costs up, paradoxically weighing on gold by reinforcing the Fed's tight policy. Emerging market central banks continue their structural shift toward de-dollarisation, buying a net 244 tonnes in Q1 2026 alone, while soaring sovereign debt levels underpin gold's role as a fiat hedge. Major institutions forecast a recovery — UBS targets $5,500, Goldman Sachs $4,900 by year-end. January's highs should return, but tactical buyers must brace for choppy consolidation before the macro tailwinds take hold.

January's $5,600 was not gold going supersonic. It was the dollar going soft. The fall back to $4,000 is not gold weakening. It is a brief rally in a currency that has lost most of its purchasing power since 1971 and will lose the rest. When interest rates go up, the deficit goes up, because interest is the fastest growing line in the budget. That is fiscal dominance, and it is why monetary tightening no longer does what the textbook says it should. Gold responds to that. It has been rising against every major currency. Central banks have been buying it steadily, because it is the one large reserve asset that is nobody else's liability. None of which means January's high returns next month. Gold ran a long way, fast. Drawdowns of twenty per cent or more are ordinary inside a structural bull market and tell you nothing about the trend. Deficits are structural, not cyclical. If you are allocating for the next decade rather than the next quarter, dips are a buying opportunity

The fall in the price of gold naturally makes it look more attractive, but investors shouldn't anchor to January's high and assume a return to that level is inevitable. Gold is an unusual asset: it produces no income and has no earnings against which to judge its valuation, so there's no reliable anchor telling us whether $4,000 is cheap or whether the rise to almost $5,600 was an overshoot.
The recent weakness is telling. Gold has fallen even as geopolitical tensions have remained high, likely because higher bond yields and a firm dollar have raised the cost of holding an asset that pays nothing.
Gold’s strongest role in a portfolio is as a diversifier: insurance you own before you need it, not a trade you should chase. At current levels, I'd favour buying gradually rather than trying to call the bottom, and owning gold for the protection it can provide, not simply because it used to be more expensive.