Why gold is once again decoupled from other assets

Why gold is once again decoupled from other assets.

The price of gold has once again decoupled from the prices of other assets: Since July 2026, the price trend of gold has been significantly decoupled from crude oil and the US dollar index. During this period, crude oil rebounded sharply by more than 40%, and the US dollar index rebounded significantly. However, gold prices fluctuated very little.

In addition, AI deleveraging did not repeat the sell-off in historical liquidity crises. This round of gold's resistance to decline is mainly due to five major changes: (

1) Speculative funds have ebbed and liquidity shocks have weakened. With the early correction of gold prices, COMEX gold transactions and positions have both fallen to lows in recent years, and speculation has subsided, showing that it has broken away from the "liquidity cash machine" attribute of leveraged funds. (

2) The intensity of ETF fund reduction has been significantly weakened compared with the previous period. The recent net outflow trend of SPDR gold ETF has slowed down significantly, and even saw a net inflow in July; (

3) The central bank’s enthusiasm for gold purchases has been restored. The People's Bank of China has increased its gold holdings for the 20th consecutive month. Other small and medium-sized central banks have continued to purchase gold this year, and emerging markets have strong demand for gold. (

4) Funds flowing out of science and technology will be rebalanced and allocated. Profit-taking funds in the technology sector may be reallocating towards gold. (

5) New players in gold - cryptocurrency holdings continue to increase. Gold contract holdings in the cryptocurrency market have increased significantly, broadening gold’s funding sources. Is gold entering a new uptrend? According to historical review, the flow of funds from North American gold ETFs is the core pricing factor of gold prices: when funds continue to flow in net, gold prices tend to enter the main upward wave, and when there is a net outflow, the price of gold is generally weak. In the future, it is necessary to focus on tracking the movement of funds in North America (pay attention to whether the early suppression factors have been effectively alleviated). At the macro-marginal driver level, the 10-year U.S. bond interest rate has recently hit the 4.7% mark again, coupled with Pakistan's mediation of the U.S.-Iran peace talks, and the emergence of Trump's TACO signal, which is expected to drive oil prices back down and ease inflationary pressures; this round of geo-inflation shocks are weaker than the previous one, coupled with shrinking U.S. employment demand, the U.S. dollar lacks a basis for continued strength, and the U.S. dollar index's short-to-long ratio has hit a high of 1.05. It is expected that the subsequent weakening of the U.S. dollar will ease the pressure on gold. From the perspective of market participants, it can be seen that the recent short-to-long ratio of COMEX gold has fallen back, reflecting that the current enthusiasm of market participants to do long has been restored, and there is a possibility of rebound; however, the proportion of long gold positions of asset management institutions is only 36%, which does not reach the 40% market start threshold. It is expected that gold has not yet entered the main rise. From a volatility perspective, when gold volatility returns below the 250-day moving average, it is easy to trigger a new round of gold prices, and this condition is currently met. Taken together, gold currently has the foundation to start a new upward trend from the perspectives of (1) market participants; (2) volatility, and the potential driving factors may appear in the Trump-US-Iran conflict TACO and the renewed weakness of the US dollar index. If these two macro-catalytic factors are effectively strengthened in the future, gold is expected to get rid of the weakness in the first half of the year in the third quarter and re-enter the upward trend. 01 Gold prices are once again decoupled from other asset prices As COMEX gold hit a low of $3,955.4 per ounce on June 30, the overall trend of gold gradually flattened. However, in the subsequent period, the trend of crude oil and the US dollar was relatively strong. Among them, after crude oil bottomed out on July 2, oil prices rebounded by more than 40% as of July 24. During this period, the overall trend of gold fell slightly by 1%. Compared with the sharp correction of gold prices in March and April when crude oil surged, gold in this round has shown a relatively obvious desensitization to the rise in crude oil prices. In addition, since July 15, the U.S. dollar index has rebounded significantly, but the price of gold has not declined significantly and has received strong support at $4,000 per ounce. Looking back at the previous period of strong U.S. dollar in May and June, gold continued to correct, but this round of rebound in the U.S. dollar did not have a similar situation, and the price trends of gold and the U.S. dollar were desensitized. It is worth noting that gold, as a highly liquid asset, will become the priority asset in exchange for liquidity when a liquidity crisis occurs in the market. Therefore, its price is prone to significant corrections in a liquidity run environment. According to historical review, during the 2020 epidemic, the reversal of the yen carry trade in August 2024, the tariff impact in April 2025, and the US-Iran conflict in March 2026, due to the sharp decline in the stock market and relatively tight market liquidity, gold prices also fell to varying degrees.
But we have seen that in this round of AI deleveraging, gold has not become a liquidity extraction machine. This round of the Philadelphia Semiconductor Index peaked on June 22. As of July 23, the overall index correction exceeded 15%. However, the overall decline of gold was less than 3%, showing the tenacity of the current gold trend. Taking into account the three major negative factors for gold: (1) crude oil surged; (2) the U.S. dollar index rebounded; and (

3) AI deleveraging failed to cause a new round of price impact on gold, indicating that there are new changes in the current market participants' views on gold. Reason 1: With the early correction of gold, market speculative funds decreased significantly. As early as the beginning of this year, the price of gold rose sharply. At that time, market participation reached a seasonal high. The trading volume of COMEX gold in the week of February 5 was close to 2 million lots, significantly higher than the same period in history. However, following the significant correction in gold prices in March and June, the enthusiasm for COMEX gold participation quickly faded. Trading volume in the week of July 17 was less than 600,000 lots, a 70% decrease from the peak at the beginning of the year, and a seasonal low in recent years. When the market heat subsided significantly, the speculative funds remaining in the gold market were relatively reduced, thus reducing the situation of gold being used as a liquidity cash machine. Reason two: The intensity of ETF fund reduction has been significantly weakened compared with the previous period. By tracking the trend of changes in ETF holdings, we can better grasp the current market's overall view of gold. Compared with most of the time in 2025, the changes in SPDR gold positions were net inflows. After entering February 2026, the changes in SPDR gold positions turned into net outflows most of the time, and the outflow amplitude expanded significantly compared with 2025. The net outflow in the week of March 5 exceeded 20 tons. What is reflected behind this is that gold ETFs are the main channel for investors other than the central bank to participate in gold transactions, and market funds have been leaving the market since February this year. After entering July, the net outflow trend of SPDR gold ETF positions slowed down significantly. There was a net inflow of positions in the week of July 9 and the week of July 23, which corresponds to the relatively stable short-term trend of gold. Reason three: The central bank’s enthusiasm for gold purchases has been restored. In June, the People's Bank of China once again "purchased gold" on a large scale. The official reserve asset data recently updated by the People's Bank of China shows that as of the end of June, my country's gold reserves were 75.44 million ounces, an increase of 480,000 ounces month-on-month. The scale of the increase has further expanded compared with May, setting the largest single-month gold purchase scale since October 2023. This is also the 20th consecutive month that the People's Bank of China has increased its gold holdings. Considering that the price of gold has continued to fall in the past quarter, the People's Bank of China's continued increase in gold holdings has provided important buying power for gold, ensuring that its price at US$4,000 per ounce is effectively supported. In addition, we can see that other small and medium-sized central banks have continued to purchase gold since this year. Among them, the National Bank of Poland has purchased 64 tons of gold, the Central Bank of Uzbekistan has purchased 33 tons of gold, the National Bank of Kazakhstan has purchased 20 tons of gold, and the People's Bank of China has purchased 25 tons of gold. The total gold purchase volume has reached 142 tons, which is higher than the total gold sales of Russia and Turkey of 115 tons (mainly in the first quarter), reflecting that the current gold buying behavior in emerging markets has been restored compared to the previous period. Reason 4: The possibility of rebalancing allocation of funds flowing out of technology From the perspective of capital rebalancing, the stabilization of gold in this round may be related to the rebalancing of funds after the withdrawal from technology. Similar examples have occurred in the previous Bitcoin market. When Bitcoin peaked at the end of October 2025, Bitcoin spot ETFs experienced four consecutive weeks of net selling, which lasted until November. During this period, gold ETFs entered a state of continuous net inflows, and the flow of funds between the two showed a certain reversal. Considering that funds participating in technology speculation have also experienced large-scale net outflows recently, and out of the idea of rebalancing funds in different types of assets, the recent net selling volume of gold has slowed down significantly. Reason 5: New players in gold – cryptocurrency holdings continue to increase
As the gold market continues to heat up, activity in related derivatives markets has further increased. According to CoinGlass data, the holdings of gold (XAU) contracts on the entire network reached 880 million U.S. dollars, of which the Gate platform held approximately 238 million U.S. dollars, ranking second among global exchanges. At the same time, the holdings of Tether Gold (XAUT) contracts on the entire network reached 528 million U.S. dollars, and the holdings on the Gate platform were approximately 118 million U.S. dollars, ranking third among global exchanges. Since July, there has been a significant increase in cryptocurrency gold contract holdings, reflecting that in addition to traditional gold market participants, the cryptocurrency market also provides important incremental funds, which has contributed to the relative stabilization of gold prices. 02 Is gold entering a new upward trend? As for the pricing power of gold, we can see that when gold ETF funds in North America show obvious continuous net inflows, the price of gold will most likely enter the main rise (January-April 2025, July-September 2025, November 2025-January 2026 ), and after North American gold ETF funds entered a state of continuous net outflow, the overall performance of gold prices was relatively weak (March and June 2026). Therefore, to determine whether gold can start a new round of market prices in the future, we need to focus on the views of North American related funds on gold. Considering that the factors that have triggered the gold correction this year mainly include (1) the sharp rise in oil prices and the rise in U.S. bond interest rates caused by the U.S.-Iran conflict; (2) the significant rebound in the U.S. dollar index. This means that funds involved in gold in North America are more concerned about the above-mentioned issues. If gold wants to enter a new round of upward trend, the factors that were suppressed in the early stage need to be phased out. Macro marginal drivers: Trump TACO and marginal weakening of the US dollar. Whenever the 10-year U.S. bond interest rate breaks through an important threshold, Trump TACO may appear. According to the trend of U.S. debt in the 10 years since the conflict between the United States and Iran, TACO occurred after Trump exceeded 4.4% and 4.7%. This corresponded to Trump delaying the air strike on Iran’s energy facilities for another 10 days on March 27 and suspending the originally planned attack on Iran on May 19. As of July 24, the 10-year U.S. bond interest rate once again hit the important mark of 4.7%. At the same time, a potential TACO signal has emerged. On the evening of July 24, according to three Pakistani sources, Pakistan was exploring ways to restart negotiations between the United States and Iran to end the nearly five-month conflict. Referring to the past experience of TACO, it is expected that the current round of US-Iran conflict easing may have a chance to come to fruition in the near future, which will lead to a correction in oil prices, making gold expected to strengthen further. In addition, judging from the current economic situation in the United States, the U.S. dollar does not yet have the foundation to continue to strengthen. On the one hand, with the rapid decline in oil prices in the early period, the mid- and long-term break-even inflation rate in the United States also fell significantly. The five-year break-even inflation rate fell from more than 2.7% in early May to less than 2.3% at the end of June, reflecting that the period when the US-Iran conflict had the greatest impact on inflation has come to an end. Even though oil prices have surged again due to the recent relapse in the situation between the United States and Iran, the increase in inflation expectations has been significantly weaker than in the previous period, indicating that the impact of this round of geopolitical shocks on inflation is more of a one-time impact. From an economic perspective, in the job market, we can see that the job vacancy ratio soared to a peak of more than 2.0 during the 2021-2022 epidemic, but has since continued to fall back to around 1.0 in early 2026, indicating a significant contraction in employment demand. The participation rate continues to fall while the vacancy ratio declines rapidly - implying that the job market is shifting from "supply shortage" to "demand shortage". Enterprises' willingness to recruit is cooling faster than the labor supply is recovering, indicating that the traditional economy is currently in a weak state. Judging from institutional holdings, the current short/long ratio of the U.S. dollar index is at a high level in recent years. Based on previous experience, whenever the short/long ratio of the U.S. dollar index reaches above 1.05, the subsequent trend of the U.S. dollar index is expected to weaken. As of July 21, the ratio has reached an important position of 1.05, indicating that market participants are bearish on the trend of the U.S. dollar in the future. Consistent with the situation analyzed above, it is expected that the headwind of gold from the strengthening of the U.S. dollar will also ease, corresponding to the fact that gold is expected to emerge from a relatively strong market.
Market participant perspective: Long enthusiasm has recovered, but has not yet reached the key threshold The current market willingness to be long on gold can be characterized by the gold short/long ratio. According to a review of history, when gold started its main rise, its short/long ratio hit 0.15 or lower. In the previous period, this indicator hit the threshold of 0.15 on June 16, and the price of gold subsequently stabilized significantly, reflecting that the current market enthusiasm for long positions has been restored, corresponding to the possibility of a subsequent rebound. In addition, asset management institutions usually have a certain degree of foresight when participating in gold transactions. When the proportion of asset management institutions' long positions in gold continues to rise to more than 40%, it is usually a forward-looking signal that triggers gold to stop falling and stabilize or enter a main rise. Judging from recent data, as gold prices continue to correct, the proportion of gold long positions held by asset management institutions has recently increased from less than 30% at the end of March to more than 36% at the beginning of July, but the overall range has not yet returned to the previous high. Therefore, from the perspective of asset management institutions, gold has not yet triggered a signal to start a new round of market prices. Volatility perspective: Volatility has returned to low levels, and conditions are in place to start a new round of market conditions In the past, before the gold market started, gold's implied volatility had dropped to low levels. Based on the reference of historical experience, the subsequent gold reallocation time point can focus on when volatility returns to low levels. Judging from past history, when gold volatility returns below the 250-day moving average, it is easy to trigger a new round of gold prices, and the relevant conditions are currently met. Taken together, gold currently has the foundation to start a new upward trend from the perspectives of (1) market participants; (2) volatility, and the potential driving factors may appear in the Trump-US-Iran conflict TACO and the renewed weakness of the US dollar index. If these two macro-catalytic factors are effectively strengthened in the future, gold is expected to get rid of the weakness in the first half of the year in the third quarter and re-enter the upward trend.

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