New Delhi

Gold prices may be approaching an interim bottom, with the broader macroeconomic environment favouring a recovery despite the recent correction, the World Gold Council (WGC) said in its latest report, noting that two of the three historical conditions associated with gold price recoveries are already in place.

The council said the current decline is more likely to represent a correction than the beginning of a prolonged downturn similar to the post-2011 period, as the macroeconomic and fundamental backdrop remains considerably stronger.

"Our simple framework suggests gold may be nearing an interim bottom: two of three conditions are in place. More importantly, unlike in 2011, the macro backdrop supports a recovery," the report said.

Gold closed October at USD 3,913 per ounce, down 6.3 per cent during the month, with prices declining across all major currencies tracked by the council. The metal is currently around 25 per cent below its January 2026 record high of USD 5,405 per ounce.

Looking ahead, the WGC identified a combination of technical dislocation and dollar strength as signals that the recent sell-off may be approaching an exhaustion point. However, it said speculative positioning has yet to undergo a complete washout, which remains an important condition for a sustained recovery.

"Today, two of the three conditions are in place. Gold is trading well below its 200-day average and the dollar has rallied into its top tier. Positioning, however, remains elevated," the report stated.

The council's historical analysis of gold bear markets since 2005 found that periods when at least two of the three conditions were present generated a median three-month forward return of 4.2 per cent, with positive returns in 90 per cent of the observations. When all three conditions were met, gold recorded positive returns in all five historical episodes analysed.

However, the WGC cautioned that the historical sample remains limited and a further reduction in speculative futures positions would be necessary before a more durable recovery could take hold.

The council also pointed to the difference between the current market environment and the conditions that prevailed following gold's 2011 peak. It said real yields are currently in restrictive territory, the US dollar is expensive and geopolitical risks remain elevated, making the post-2011 multi-year decline a poor comparison for the present correction.

"The fundamental backdrop increases the likelihood that this is a correction rather than the start of a prolonged downtrend," the report said.

On the technical front, gold has moved to a downside extreme, trading around 10 per cent below its 200-day moving average, while holding above the 38.2 per cent Fibonacci retracement level of USD 3,857 per ounce.

The council said the metal could still test this support level as downward momentum continues, but indicated that such a move could offer an attractive entry opportunity for investors.

Beyond the immediate recovery outlook, the WGC flagged policy decisions surrounding the US midterm elections and developments in equity and credit markets as key factors that could influence gold prices during the remainder of 2026.

It cautioned that further weakness in equity markets and credit could make US Treasuries more attractive, potentially reviving the unusual positive correlation between gold prices and yields observed in recent weeks. The outlook would also depend on whether inflationary pressures begin to ease.

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For longer-term investors, the council maintained that the recent weakness could offer an opportunity to gradually increase exposure rather than focus solely on identifying an exact price floor.