After one of the most explosive rallies in years, gold is taking a breather, and that’s precisely the opportunity long-term investors have been waiting for.

Over the past two weeks, the price of gold and the SPDR Gold Shares ETF (GLD) have both fallen more than 5%.

This drop follows a powerful rally that began in mid-April, when Trump Administration officials unveiled sweeping new tariff measures. The announcement triggered a wave of risk-off behavior and drove gold sharply higher, as capital rotated out of equities and into defensive assets.

Gold surged more than 15% in just ten trading days, marking one of the fastest climbs the metal has seen in over a decade. But as is often the case, the momentum reversed.

Investor fear eased when the Trump Administration announced its 90-day delay to allow for tariff deals to be negotiated. That triggered a round of profit-taking and gold retreated from its all-time high of $3,500.

On June 6, GLD shares retested their April highs – and once again, profit-taking hit hard – dragging the price down roughly 5%.

That brings us to the current moment… is this a top, or is it a tactical entry point for long-term gold buyers?

The evidence overwhelmingly points to the latter.

This Is a Healthy Correction, Not a Breakdown
From a technical standpoint, gold remains in a well-defined long-term uptrend. Despite the recent 5% pullback, prices are still holding above their rising 50-day moving average, and the longer-term 200-day trend remains firmly bullish. What we’re seeing is a classic overbought reset following a vertical rally. Temporary profit-taking after retesting previous highs is normal—even healthy. In fact, these pullbacks often reinforce support levels and create structurally stronger charts.

The important distinction is this: we’re not seeing a breakdown in gold’s trend—just a digestion of gains. And the underlying macro picture continues to paint a long-term bullish setup.

Let’s walk through four key fundamental tailwinds that are aligning in gold’s favor.

1. Exploding U.S. Debt
The Senate just passed the so-called “Big Beautiful Bill,” a sweeping tax-and-spending package projected to add between $3.3 trillion and $4 trillion to the national debt. And that’s assuming no extensions to temporary benefits—something markets have learned never to rule out.

The Congressional Budget Office’s projection only deepens the existing structural problem: runaway deficits during peacetime. With no meaningful fiscal restraint and no political will to raise taxes or cut spending, the U.S. government is increasingly reliant on debt monetization. That dynamic erodes confidence in the dollar over time and directly benefits hard assets—especially gold.

This is not theoretical. The market is already reacting. Foreign central banks are increasingly diversifying away from U.S. Treasuries and into tangible, non-sovereign assets like gold. The higher the debt load climbs, the more attractive gold becomes as an insurance asset.

2. The U.S. Dollar Is in a Stealth Bear Market
While the dollar hasn’t collapsed in a headline-grabbing way, its long-term trend has quietly turned bearish. Since peaking in late 2022, the U.S. Dollar Index (DXY) has been making a series of lower highs and lower lows—a textbook technical downtrend.

The reasons are structural:

  • Slower economic growth expectations in the U.S.
  • Diminishing yield advantages as the Fed nears the end of its tightening cycle
  • Declining foreign demand for Treasuries
  • Rising twin deficits (fiscal + current account)

In currency markets, these factors don’t create overnight crashes—they generate slow, grinding declines. But for gold investors, that’s a tailwind with staying power. A weaker dollar reduces the opportunity cost of holding gold and improves returns for foreign buyers. Historically, sustained dollar weakness has been one of the most reliable macro drivers of gold bull markets.

3. The Bond Market Is Flashing Warning Signals
Gold and bonds have long moved in tandem during periods of economic uncertainty. And right now, the bond market is telling a very different story than the equity market.

While the S&P 500 continues to flirt with its highs, Treasury yields are struggling to reflect confidence in the growth outlook. Yields have failed to trend meaningfully higher even as inflation data remains hot—an indication that bond traders are more concerned with slowing growth than with long-term inflation.

This misalignment matters. The bond market is where institutional capital concentrates its “macro bets.” When bonds don’t confirm the equity market’s optimism, gold tends to benefit from rising risk aversion.

Complicating matters, last week’s hotter-than-expected CPI report has derailed expectations for a July rate cut from the Fed. That uncertainty—especially around central bank credibility—is another factor that adds value to gold as a policy-agnostic asset.

4. Central Banks Are Buying and Now They Want Their Gold Back
The most overlooked but powerful force behind this bull market in gold is central bank demand.

Over the past year, global central banks—especially in China, Russia, India, and emerging markets—have been increasing their gold reserves. These purchases are not small. According to the World Gold Council, 2023 marked the highest level of central bank gold buying on record. That trend has continued into 2024 and 2025.

But now there’s a new layer: repatriation.

Last week, the Financial Times reported that both Germany and Italy—two of the largest gold holders after the U.S.—are facing public pressure to move their bullion out of New York and back to Europe. The concerns stem from rising geopolitical tensions and President Trump’s repeated attacks on the Federal Reserve’s independence.

Let’s be clear: this is not just symbolism. If Germany and Italy begin the process of physically repatriating their gold, it would remove significant float from the global market and reduce liquidity in U.S. vaults.

More importantly, it sends a signal: sovereign trust in U.S. financial custodianship is weakening.

That signal could prompt other central banks to follow suit—either by buying more gold outright or by consolidating what they already own. Either way, it supports the structural bid beneath the market and helps reinforce technical support zones. Dips become buyable. Resistance becomes temporary.

The Technical Picture: Higher Lows, Higher Highs
Even with this 5% pullback, gold remains above every key long-term moving average. Price action is constructive. The recent highs near $3,500 marked a double top—but not a failed breakout. Instead, the current decline looks like a typical retest of prior breakout levels and moving average support.

GLD’s volume surged during the rally and has remained elevated during the pullback—an indication that longer-term buyers are using the decline to enter, not exit.

As long as the uptrend in higher lows remains intact, the bullish structure is alive. Any dip toward the $3,250–$3,300 zone offers a tactical buying opportunity.

Bottom Line
Gold is handing long-term investors a second chance. After a rapid run to new highs, a short-term pullback of 5% has spooked some traders—but the fundamental case has only strengthened.

We’re in the early innings of a multi-year shift: record government debt, a weakening dollar, fragile bond market confidence, and surging central bank demand all point to structurally higher gold prices over time.

For those who missed the first leg of the rally, this correction is the setup.

Here’s How to Trade Gold’s Bull Trend
As always, the easiest way to trade this bullish trend is to simply buy and hold the U.S. Gold Fund (GLD).

Our year-end target for the gold-based ETF calls for another 15% gain reflecting a target price of $350.

On March 5th I provided two trade ideas to help you take advantage of the rally in gold. The option that was highlighted in that article has already traded to gains of more than 100% as of today, so I an offering an updated option idea to leverage the expected bullish move.

Options traders may want to consider buying longer-term options to leverage the expected move. I personally prefer buying slightly out-of-the-money calls at the $305 strike price using the March 20, 2026 expiration.

Those calls are priced around $1,350 per contract at the time of this writing.

A move further to $350 before the March 2026 expiration date would result in an intrinsic return of 133% for the call option compared to 15% for the buy-and-hold approach using GLD shares.

As always. Investors should make certain that they have the necessary education and experience trading options while understanding the risks associated with options investing.

— Chris Johnson

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Source: Money Morning