Gold’s “downside dip” not a surprise: deVere Group

Investors have been urged not to panic following gold’s descent from its recent run of record pricing reaching upwards of US$4,300 an ounce, with its slip only a natural and to-be-expected occurrence after an “extraordinary” rally.

According to deVere Group chief executive, Nigel Green, gold’s dip to just under US$4,080 is likely “not the end of the rally, rather a natural breather before the next leg up”, following a price surge fueled by central bank gains and investor flocking to a ‘safe haven’.

“Nobody should view today’s pull-back as a failure of gold’s bull market,” he said.

“After that extraordinary run, the market needed a pause, a moment to catch its breath, and that’s exactly what we’re seeing now. Technical over-extension was unavoidable.

“With prices trading well above their longer-term trend, some short-term profit-taking and consolidation was overdue.”

Green said the firm’s optimistic outlook is underpinned by a “structural not speculative” approach, given central banks continue to add to their gold reserves – with India in particular exceeding US$100 billion – and positive drivers remain, including “weaker real yields, elevated inflation risk and government-balance-sheet excess”.

“Here’s the key point: this dip is healthy, not alarming. It clears out overheated speculative positions and leaves space for the bigger forces to resume control,” he said.

“And those bigger forces are still very much in place.

“Governments continue to issue debt at levels unseen in decades; inflation pressures have not gone away; and central banks, uneasy with the dominance of the US dollar in reserves, are still turning to gold.

“When you see a central bank making gold purchases even at such elevated prices, you know this is about strategic diversification – not short-term momentum chasing.”

Green emphasises the correction is only a “logical recalibration”, paving the way for the market to ride “the next upward wave”.

“We recognise that volatility, short-term pull-backs and technical resets are part of the journey,” Green said.

“But when the base of demand is anchored in reserve diversification, sovereign policy and inflation hedging, then the free-fall scenarios fade. The narrative has not changed. What has changed is the pace of the move.

“When the dust settles, prices will rise again. Central bank purchases create a defendable floor beneath gold bullion.”