Gold’s sharp correction has pulled prices back toward fair value rather than ending its longer-term bull market, according to WisdomTree’s Nitesh Shah. A weak U.S. jobs report then sent bullion above $4,100 as traders pared bets on Fed rate hikes.
Gold’s steep pullback this year is a healthy normalization, not the start of a bear market, WisdomTree’s Head of Commodities and Macroeconomic Research Nitesh Shah told Kitco News. He argued that investors have grown too aggressive in pricing in future Federal Reserve rate hikes after the central bank’s hawkish June guidance.
Why Shah sees fair value, not a bear market
Shah’s valuation model — built on bond yields, the U.S. dollar, inflation, and speculative positioning — showed gold at an unusually large premium to fair value in January. That gap has now largely closed. According to Kitco News, Shah judged prices had grown too high: “I think prices just got too high.”
He questioned whether the Fed can hold a prolonged hawkish stance given mounting government debt, arguing that aggressive balance-sheet reduction would itself tighten policy and leave less room for hikes. The most important variable for gold, he said, remains the long-term direction of the U.S. dollar, which he expects to weaken as fiscal and current account deficits eventually weigh on the greenback.
Weak payrolls hand gold a fresh catalyst
The bullish case got immediate support. Gold climbed above $4,100 after a weak Non Farm Payrolls report showed the U.S. economy added just 57,000 jobs in June, against a forecast of 110,000. The dollar sold off as traders trimmed hawkish Fed bets, and the 2-year Treasury yield pulled back toward 4.13%.
The FedWatch Tool now shows a 47.3% chance of a September rate hike, while the probability of two hikes by December has slipped to 28.3%.
Near-term charts stay cautious
Not every read is bullish. Investing.com’s Satendra Singh noted that gold futures have been stuck in a narrow range between $4,124.19 and $4,035.38 since June 23, after testing a low at $3,955. A breakdown below support at $4,035.38 could trigger selling in the near term.
Shah, for his part, is looking further out. WisdomTree is keeping its long-term view that prices could run 25% higher by Q1 2027, citing continued central bank accumulation and a little more inflow into its gold products, which Shah said may be down to bullion becoming cheaper.
Sources: KITCO, FXEmpire, Investing.com
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