Gold prices (GC=F) stabilized Wednesday after the worst intraday decline in more than 12 years, but one of the hottest rallies this year remained largely on pause.
Futures on the yellow metal swung between negative and positive territory to hover near $4,120 a troy ounce after falling 5.5% in the previous session as investors locked in profits and the U.S. dollar strengthened.
Before the sharp sell-off, gold had soared 65% since the start of the year, driven by strong demand from global central banks and investors’ flight to the safe-haven asset to protect against the decline of fiat currencies in so-called depreciation trading. Wall Street strategists had warned of overbought conditions.
“We highlighted the potential for volatility given the scale and speed of the rally, but we believe precious metals should remain supported by a combination of macroeconomic, fundamental and dynamic factors,” Ulrike Hoffmann-Burchardi, Americas chief investment officer at UBS, wrote on Wednesday.
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More expected rate cuts from the Federal Reserve this year, along with growing demand for precious metals and continued political uncertainty, should remain a tailwind for commodities during the first quarter of 2026, the strategist said. She noted that real interest rates in the United States could fall below zero, given persistent inflation, which could make the U.S. dollar less attractive to investors, boosting flows into precious metals.
“We continue to view gold as an effective means of portfolio diversification, with further gains toward our $4,700/ounce bull case if adverse macroeconomic and political developments arise,” Hoffmann-Burchardi wrote.
The pause in gold’s rally could signal rotation opportunities for bitcoin (BTC-USD), which is trying to stabilize after a volatile two weeks, Fundstrat digital assets strategist Sean Farrell said Wednesday.
The world’s largest cryptocurrency fell about 3% on Wednesday to hover around $108,000 per token, reversing a three-day rally.
“I don’t think it’s a coincidence that the second we saw gold crash, we saw bitcoin bounce back pretty violently,” Farrell said Tuesday evening.
Bitcoin rose from around $107,000 last Friday to a high of $113,000 on Tuesday, sparking renewed optimism that the recent rout of cryptocurrencies may be in the rearview mirror.
The strategist noted that over the past few years, the two assets have had a leading-lag relationship.
