Despite gold’s recent struggle to work as the safe haven it usually becomes during times of crisis, the investment institute has argued this reflects more on technical factors than fundamentals.
While gold delivered a stellar run last year, it has struggled to maintain that momentum since the outbreak of the US–Israel war with Iran in late February.
Since the war began, gold has fallen about 10 per cent to US$4,755 an ounce, though it has recently made some recovery on the back of US President Donald Trump’s ceasefire extension and other signals.
But despite gold’s failure to deliver its usual safe-haven protection, Amundi head of cross-asset strategy and research Italy, Lorenzo Portelli, has argued the repricing has been mostly driven by positioning.
“Gold has undergone a meaningful sell-off in recent weeks, but we believe the move has been driven more by a repricing of short-term macro fears than by any deterioration in the metal’s medium-term fundamentals,” Portelli said.
In particular, he pointed to the unwinding of ETF positions accumulated by retail investors and commodity trading advisors (CTA) in March as both a catalyst for the downside move and an added source of momentum to the decline.
Globally, recent World Gold Council data showed gold ETFs shed US$12 billion (84 tonnes) during March, driven almost entirely by North America (US$14 billion) and Europe (US$0.1 billion).
“As often happens in crowded trades, once prices began to reverse, the selling pressure became self-reinforcing. Yet this type of move typically says more about positioning than about a lasting shift in the fundamental outlook,” Amundi stated.
In Portelli’s view, the market has largely been recalibrating expectations around a 2022-style scenario, which was characterised by a sharp inflationary shock, an aggressive central bank response, and a sustained rise in both nominal and real interest rates.
However, he said that the framework does not fully reflect the current environment.
“Today, the picture looks different. Core inflation remains more subdued and better contained, reducing the need for central banks to pursue an even more hawkish stance. In our view, the inflationary impulse triggered by the energy shock is likely to prove temporary rather than persistent.”
Looking ahead over the next 12 months, Portelli said the firm remains constructive on gold, seeing potential for prices to move toward US$5,500.
The gold price last surged above this record high back in January, as weakening confidence in monetary policy, fiscal discipline and US political stability drove investors and central banks into the precious metal.
Amundi’s positive outlook hinges on several structural supports, including a belief in ongoing central bank demand, particularly from emerging market authorities diversifying reserves away from traditional currencies.
Moreover, the firm believes mine supply is “unlikely to keep pace” with long-term structural demand, effectively constraining growth in new production. Third, Portelli said rising global debt is an increasingly important backdrop for gold, as ballooning sovereign and private leverage reinforces demand for hard assets.
“In the near term, some central banks may choose to use part of their gold holdings tactically to defend their currencies amid heightened volatility, including risks stemming from geopolitical tensions in the Middle East.
“While such actions are possible, they should not be interpreted as a sign of a structural shift away from gold. Rather, they reflect short-term policy management in a more uncertain environment,” he added.
Ultimately, the firm concluded that the precious metal remains an effective hedge against systemic risk, currency weakness and policy uncertainty, even if it is not a universal shield against all market shocks.
“With prices already down roughly 15 per cent from recent highs, much of the near-term bad news appears to be reflected in valuations. As a result, the downside linked purely to rate fears now looks more limited than it did at the start of the correction.”
Recent reversal in ETF outflows
Moreover, despite the unwinding of gold ETFs in March, the World Gold Council has already reported a 21-tonne inflow in early April – largely from Asia, particularly China – which has helped to steady the market.
Speaking to Investor Daily, Global X investment strategist Justin Lin noted a similar reversal to the outflow trend seen in March.
While the ETF provider saw $16 million of gold outflows in March across its three gold ETFs (GOLD, GXLD and GHLD), he said it has seen $56 million of inflows in April so far. Since the Iran war began, Global X has seen approximately $40 million of net inflows into its gold ETFs, meaning it remains on track for a record year of gold inflows.
“While higher interest rates and tighter liquidity have modestly weighed on gold since the onset of the Iran War, the broader investment case remains firmly intact. In fact, rising geopolitical volatility has likely strengthened gold’s long-term appeal,” Lin said.
Echoing Amundi, he added that positioning now appears “cleaner”, with profit-taking largely having run its course, portfolios adjusted, and speculative froth mostly flushed out. He said this should support a more stable outlook with less sensitivity to short-term sentiment swings.
“In the near term, gold is likely to trade in a range as investor attention shifts toward equities and the strength of the US earnings cycle.”
