(Kitco News) - Gold’s sharp correction from its January highs may have rattled investors, but the pullback is creating an attractive entry point as underlying fundamentals remain firmly supportive, according to one research analyst.
In an interview with Kitco News, Nitesh Shah, head of commodities and macroeconomic research at WisdomTree, said the recent selloff — which has seen gold prices drop more than $1,000 from peak levels — appears largely disconnected from macroeconomic fundamentals and instead reflects a combination of positioning shifts and forced liquidations.
“I think most of what we’ve lost since January highs is just froth coming off prices,” he said.
Shah explained that traditional drivers such as bond yields, the U.S. dollar, and speculative positioning can only explain a fraction of gold’s decline. His model suggests these factors account for roughly $200 of downside, far short of the total correction.
“That’s pretty much nothing… and we’ve lost more than $1,000 from the peak,” he said, underscoring that the bulk of the move cannot be explained by fundamentals.
Instead, Shah pointed to broader market stress as a key driver, with investors selling gold to raise liquidity during periods of volatility.
He added that this pattern is not unusual. Historically, gold often experiences an initial decline during major geopolitical events before resuming its upward trend.
“Every big geopolitical risk event we’ve seen in the past, we’ve seen a bit of gold price downside before it goes up,” he said.
Despite near-term volatility, Shah was unequivocal in his assessment that current levels represent a rare buying opportunity.
“Gold is at bargain prices… it really does look like a good opportunity to buy,” he said.
For investors who have been waiting on the sidelines, he suggested the recent correction may be the moment they have been anticipating.
“People have been asking me for years, ‘I like gold but I’m looking for an entry point.’… This is probably what they were waiting for,” he said. “If you’re not going to buy at this time, you’re never going to buy in your life.”
Part of gold’s recent weakness stems from shifting expectations around interest rates, but Shah argued that markets may be overestimating the likelihood of aggressive tightening.
He expressed skepticism that central banks would raise rates significantly to combat inflation driven by supply-side shocks, warning that such moves would risk triggering recession.
“I am highly skeptical that central banks would hike interest rates in this environment,” he said.
Instead, he expects policymakers to remain in a holding pattern, allowing inflation pressures to play out without aggressive intervention — a scenario that would ultimately support gold.
Looking ahead, Shah said persistent geopolitical tensions will remain a key pillar of support for gold prices, even in the face of short-term volatility.
“Geopolitical risks aren’t going away, and when investors realize this, that’s when gold prices will rise,” he said.
While his base-case model points to gold ending the year around $5,020 an ounce, he added that upside risks could push prices significantly higher.
“I wouldn’t rule out $6,000 based on the new geopolitical risks,” he said.
Beyond gold, Shah said the current environment is broadly supportive for commodities as a whole, particularly as the global economy moves into a late-cycle phase marked by rising inflation risks and supply constraints.
“Late-cycle economic dynamics tend to be positive for commodities,” he said, noting that energy, agriculture and base metals are now catching up after precious metals led the rally earlier in the cycle.
He added that ongoing geopolitical disruptions and structural underinvestment in supply are creating the conditions for a prolonged period of strength across the broad commodity complex.
Shah said that he recommends allocating between 15% and 20% of a traditional portfolio — alongside equities and bonds — to commodities. Within that allocation, roughly 20% should be held in precious metals, including gold.
“I would go broad in commodities, but within that, about 20% should be in precious metals,” he said.
Shah added that investors should focus on liquid markets and consider tilting toward commodities with strong price momentum and tightening supply conditions, rather than simply tracking broad indices.
