Gold enters correction territory as global investors stop worrying as much about China tensions, Fed independence, AI bubble
Gold has fallen into correction territory now that investor fears around China tensions, Federal Reserve independence and an artificial intelligence bubble have been soothed. After topping $4,300 just last week, both spot gold and gold futures have made short work of dipping below $4,000. The yellow metal is still up more than 40% in 2025. That pullback could continue over the near term, according to Maximilian Layton, global head of commodities research at Citi. Now that gold has breached $4,000, Layton expects $3,800 is the next stop for the yellow metal, a fall of more than 4% from current levels. He expects material support at around $3,600, representing a 9% slide. “President Trump’s shift towards dealmaking not just with China, but also with Malaysia, Thailand, Vietnam, Cambodia, and likely soon with Brazil, India, and Taiwan—and President Xi’s apparent willingness to go along with it, alongside a shift in price momentum in the gold market, and a possible end to the US shutdown—are set to see gold continue to move lower over the coming days and weeks,” Layton wrote on Monday. @GC.1 1D mountain Gold futures, 1-day performance Investors have indeed grown more optimistic on certain fronts that have pressured sentiment this year. On top of U.S.-China tensions easing, concerns around Federal Reserve independence have been soothed. Earlier this month, the Supreme Court allowed Fed Governor Lisa Cook to remain in her post for the time being. Fears of an AI bubble have also been mitigated, as investors become more accepting of higher valuations from the tech cohort. On Tuesday, the stock market was higher ahead of key reports from five of the “Magnificent Seven” companies this week. Still, Wall Street expects that concerns that drove investors into the safe haven asset will remain, even if there is a correction in the near term. On Tuesday, Deutsche Bank’s Michael Hsueh said he expects a gold correction will bottom at $3,700 to $3,800, a level that suggests the drawdown is “closer to its end than the beginning.” He also remains confident in the medium-term outlook for the metal. Earlier this month, Bank of America commodity strategist Michael Widmer said gold could surge to $5,000 per ounce in 2026, a record high that would be more than 25% above current levels. Similarly, Janney Montgomery Scott’s Dan Watrobski said he expects longer-term target is in the $4,500 to $5,000 range. “The medium- to long-term case to allocate towards gold as a hedge against possible tensions between China and the US, Russia and Ukraine, or China and Taiwan; an equity market collapse; or government-debt-related debasement/ recession/bond vigilante moments remains strong,” Citi’s Layton wrote. “The question is at what price asset allocators step in (we don’t think it is $4,000/oz on the way down).” ( Learn the best 2026 strategies from inside the NYSE with Josh Brown and others at CNBC PRO Live. Tickets and info here . )
