Ongoing Dollar Weakness Continues to Support Gold's Medium-to-Long-Term Trend

As previously noted, "the dollar remains vulnerable," and if this weakening trend persists, gold is expected to continue benefiting from safe-haven demand, maintaining a solid foundation for medium-to-long-term support. On Monday, the dollar broadly weakened, further supporting gold prices. Spot gold is currently trading in a narrow range around $3,330 per ounce.

Bullish Factors

1. Outlook for the Dollar: Growing Structural Depreciation Pressure

The negative impact of tariff policies on the U.S. economy is expected to gradually emerge between mid-May and early June. The broad and unilateral nature of these tariffs will force U.S. businesses and consumers to become price takers. Should supply chains and consumption lack short-term flexibility, the pressure on the dollar to depreciate will intensify.

Additionally, the private capital inflows that have supported the dollars strength over recent years have started to reverse. Two key forces—economic shocks and capital outflows—are likely to drive the dollar into a structural depreciation cycle, supporting gold prices for at least the next two quarters.

2. Resilient Domestic Demand in China

Despite high gold prices dampening jewelry consumption in China (a 26.85% year-over-year decline), overall investment demand remains robust. In Q1 2025, the People's Bank of China increased its gold reserves by 12.75 tons, and domestic gold ETF holdings surged by 23.47 tons, marking a 327.73% increase from a year ago.

Moreover, complex geopolitical tensions and an uncertain economic outlook are fueling strong private sector demand for gold bars and coins. Compared to short-term speculative trading by Western hedge funds, Chinese investors steady buying on dips has become a crucial pillar supporting the gold market.

Bearish Factors

1. Abnormal Capital Flows: Potential Short-Term Correction Risk

Data shows that as of last Tuesday, gold prices were trading approximately 27% above their 200-day moving average—an extremely rare occurrence over the past 30 years. The SPDR Gold Trust (GLD) saw inflows exceeding the 95th historical percentile over two weeks, followed by single-day outflows also surpassing the 95th percentile.

[GLD Abnormal Capital Flows — Source: Nomura Asset Management]

Such "massive in-and-out flows" typically signal overheated market sentiment, increasing the likelihood of a short-term pullback. Historically, out of nine similar episodes, eight led to significant gold price corrections within two months.

2. Supply Side: Healthy Mining Activity Sustains Pressure

Gold miners are maintaining stable cost structures, with production input prices such as steel and oil remaining flat or declining, which has further improved mining margins. With robust profitability, mining companies are expected to continue high production levels, putting some upside pressure on gold prices.

Conclusion

Supported by ongoing dollar vulnerability, shifts in U.S.-China capital flows, and global safe-haven demand, the medium-to-long-term outlook for gold remains bullish. Structural depreciation pressures on the dollar—driven by tariff impacts and capital outflows—are firmly in place, providing sustained momentum for gold. However, with signs of short-term overextension and growing technical correction risks, investors should manage their positions carefully and prioritize setting up after a pullback.

[Gold Price Technical Levels]

From a technical standpoint, as long as gold holds above $3,300, the next key resistance zone is between last Fridays peak at $3,363–$3,370. A breakout above this level would likely open the path toward $3,400.

• Resistance: $3,363–$3,370, $3,400 per ounce
• Support: $3,263, $3,300 per ounce

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