Gold's price de-correlated from real yields in 2022-2025 because strong structural demand from central banks and retail investors overshadowed rate-sensitive ETF flows. Recently, as this structural demand has softened, marginal pricing power has reverted to rate-sensitive ETFs, re-establishing the traditional link to yields.
Even if the Federal Reserve remains on hold, gold's potential gains are limited. The market has priced in a bias towards future hikes, creating a "sticky" upward slope in the rates curve. A significant price rally in gold requires not just a pause, but a clear, "materially dovish pivot" from the Fed.
The current slowdown in gold purchases by central banks is seen as a temporary, cautious pause rather than a long-term trend reversal. This pause is attributed to banks unwinding defensive stances taken during recent geopolitical conflicts. The underlying structural drivers for central bank demand are expected to reassert themselves.