If you’ve been following our analysis regularly, then you know that at the end of December we shared our outlook for the months ahead, especially for 2026. At that time, we highlighted that due to different interest rate cycles and extreme bearish positioning on the dollar, we expected the strong trends seen in 2025 to slow down. We also covered gold and talked about pullback in 2026.
As we can see now, metals have already experienced a notable pullback, and the key question is whether this correction is complete or if it will continue. The most important factor here is the Fed and its rate policy. If you compare Fed rate cycles with gold, the correlation has been quite clear. Each time the Fed was cutting rates, gold tended to rally, while periods of holding or hiking rates led to consolidation or pullbacks in metals.
Right now, inflation in the US remains elevated, partly due to higher energy prices since March, and is still above 3%. If inflation stays at these levels, the Fed is less likely to cut rates anytime soon. More likely, they will stay on hold and wait for more data before making any decisions.
If that’s the case, then gold could also remain in a consolidation phase. From an Elliott Wave perspective, we may be dealing with a higher degree wave four, which could become larger and more complex, especially since wave four is rarely smaller than wave two of the same degree.
From a time perspective, this could mean the market remains stuck in a broad range around 4500 for a while. There will still be opportunities, but in the current environment, it may be better to stay patient and look for entries at lower levels, potentially closer to 4000 or 3500, rather than chasing here.
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