After surging early in the year, gold prices have recently undergone a significant correction, prompting some investors to worry whether the precious metal's long-term bull market has ended. However, market strategists indicate that this decline does not signal a trend reversal but rather a return to reasonable value from an overheated state, creating room for a subsequent rebound. There is a view that gold still has opportunities to resume its upward trajectory this year. Previously, market pricing regarding the Federal Reserve's rate hike path seemed overly aggressive; particularly following the Fed's hawkish guidance, investor sentiment may have run ahead of fundamentals.

Analysts note that investors often focus excessively on Federal Reserve officials' interest rate projections while overlooking the broader economic constraints facing the central bank. Although the labor market remains strong and inflation is high, the overall narrative has not fundamentally changed. If the Federal Reserve significantly shrinks its balance sheet, this in itself creates a monetary tightening effect, thereby reducing the necessity for multiple rate hikes. Furthermore, against the backdrop of a continuously rising government debt burden, it is questionable whether policymakers can maintain a hawkish stance in the long term. An overly hawkish stance means significantly rising interest payment bills, which could force a policy shift at some point to avoid causing a recession or triggering financial system instability.

Regarding the recent decline in gold prices, market perspectives describe it as a healthy normalization rather than the beginning of a long-term bear market. Earlier this year, speculative overheating pushed gold prices far above their fundamental value; the subsequent decline was primarily a correction of the previously overly bubbly portion. According to relevant valuation models incorporating factors such as bond yields, the US dollar, inflation, and speculative positions, gold exhibited an abnormally large premium relative to fair value in January. Now, this gap has largely disappeared, indicating that current gold prices do not deviate significantly from fair value. This implies that if the macro environment evolves as expected, gold possesses the conditions to resume its long-term upward trend, such as inflation remaining high, bond yields falling, or the US dollar depreciating.

The trajectory of the US dollar is viewed as a key variable affecting gold. Although the dollar has strengthened in recent months, mainly driven by market bets on a more hawkish Fed policy, this round of dollar appreciation may ultimately be only temporary. The story of structural dollar depreciation still holds; continuous US fiscal deficits and current account imbalances are fundamental factors that may suppress the dollar in the future. Budget deficits and current account deficits should eventually begin to exert greater downward pressure on the dollar. The current strength of the dollar is merely because the market expects the federal funds rate to be higher, an expectation that may be misplaced. Meanwhile, easing geopolitical tensions and improvements in global energy supply are expected to help cool inflation in the mid-term, thereby reducing the pressure on the Fed to continue aggressively tightening policy.

Based on the above background, market institutions maintain a long-term bullish outlook on gold, expecting that by the first quarter of 2027, gold prices could rise 25% from current levels, with a target exceeding $5,000 seen as easily achievable. Although the abnormally strong buying momentum seen early this year may not return immediately, structural demand sources for gold remain solid. Related industry surveys show that the proportion of central bank respondents planning to increase gold holdings in the coming year has hit a record; central banks may buy more following the price decline. Although gold's recent performance has been weak, long-term investors should distinguish between short-term trading positions and gold's strategic role in a diversified portfolio. Notably, some gold investment products have recently seen capital inflows, possibly due to gold prices becoming slightly more attractive. Overall, the short-term correction in gold is primarily a valuation correction and a working off of speculative bubbles. As long as the logic of long-term dollar weakness remains unchanged, inflation remains sticky, bond yields fall, and central banks continue to increase gold holdings, gold prices may rise again in the future.