US 2-year yields have moved above a previous downward trend, pointing to changing expectations for US monetary policy amid stagflation risk. Gold is described as more exposed as this shift alters the macro backdrop.
Positioning linked to currency debasement has become crowded, based on analysis of 13F filings. The most popular physically backed gold ETF is held by institutions at roughly 67% of the level of the most widely held ETF on record.
Money supply growth has returned to a pace closer to that of the wider economy. Rate markets are priced for a longer pause, with limited room left to the expected terminal level.
Concerns over Federal Reserve independence are described as easing due to recent obstacles in the Fed Chair confirmation process. A US Supreme Court ruling related to the Lisa Cook case is expected within 2–3 months.
Central bank buying is still a supportive factor for gold, but the pace of official purchases has fallen over the past year. The Middle East conflict is linked to expectations of further declines in official sector buying, due to effects on Gulf economies.
With US 2-year yields breaking above 3.95% for the first time since late 2024, the opportunity cost of holding gold is increasing significantly. This move signals that the bond market is getting more worried about a stagflationary environment where the Fed keeps policy tight. For gold, which offers no yield, this makes it a less attractive asset.
The debasement trade appears overextended, as we’ve seen immense institutional participation over the last two years. While holdings in the largest gold-backed ETF are still substantial, filings from the fourth quarter of 2025 showed the first net decrease in institutional ownership since the start of 2024. This suggests the strongest hands may now be looking to reduce their exposure.
Key pillars supporting gold are also weakening as we head into the second quarter of 2026. The Federal Reserve’s data from last month showed M2 money supply growth holding steady near a 2.1% annual rate, far from the levels that initially fueled fears of currency debasement. Meanwhile, rate markets are pricing in less than a 20% chance of a rate cut before September, removing a major catalyst for gold prices.
Even the most reliable buyers are slowing down. The World Gold Council’s report for the final quarter of 2025 confirmed that net purchases by central banks have now declined for three consecutive quarters. With political concerns around Federal Reserve independence also easing after last year’s confirmation hearings, a primary safe-haven argument for holding the metal has been neutralized.
Given this backdrop, traders should consider positioning for downside or sideways price action in the coming weeks. Buying puts or establishing put debit spreads on major gold ETFs provides a defined-risk method to profit from a potential decline below the $2,300/oz support level. For those with a less aggressively bearish view, selling call credit spreads above the recent highs around $2,450/oz could capture premium as gold struggles to advance against these policy headwinds.
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