Gold is still stuck in a holding pattern, but the bullish long-term case remains intact, says Tanglewood's Bruce

In an interview with Kitco News, Tom Bruce, Macro Investment Strategist at Tanglewood Total Wealth Management, said that he is relatively neutral on gold in the near term, but the longer-term outlook for the precious metal remains constructive.

Bruce described the current environment as one of the most difficult periods to assess for gold investors.

He explained that gold's advance to record highs at the start of the year was initially driven by aggressive central bank purchases, as nations diversified away from U.S. dollar-denominated assets, and by speculative momentum. However, much of that enthusiasm has since faded as investors redirected capital toward high-growth sectors such as artificial intelligence and semiconductor stocks.

"The element that was driving [gold prices] a lot higher at the beginning of the year seems to have moved on," he said. "Now gold is being driven by its traditional drivers — interest rates."

With geopolitical fears easing and safe-haven demand failing to materialize in a meaningful way, Bruce said gold has become increasingly sensitive to real interest rate expectations. While that creates uncertainty in the short term, he does not see a major breakdown developing.

"It's really consolidation right now," he said, describing the current market as more of a positioning phase than the start of a significant downtrend.

Bruce added that the metal has already absorbed a substantial amount of negative news after successfully holding key technical support around $4,000 an ounce.

"It's come down a lot already, and it held that $4,000 support level," he said. "A material break below there would be more concerning for me."

Although investor enthusiasm has cooled, Bruce said he is not seeing widespread liquidation of gold positions. Instead, many investors appear content to chase stronger-performing equity sectors while maintaining existing exposure to precious metals.

Despite the current lackluster investor interest, Bruce said that the longer-term bullish drivers have not disappeared.

He pointed to concerns over currency debasement, the possibility of lower real interest rates, and, most importantly, the prospect that central bank buying could reaccelerate after a slowdown this year.

"We should look at this as a pause for central bank buying in large part. I think overall, if you have a resumption of this demand, then you have more upside ahead in gold," he said. "I would say central bank buying resuming would probably be the quickest path to getting back to record highs."

In the near term, Bruce expects gold to remain rangebound as markets assess the Federal Reserve's next move. He explained that expectations for a more hawkish monetary policy may already be largely reflected in current prices.

"There is very little chance of a cut," he said. "But if there's any hint that they're going to just maintain rates this year—not even cut, but just maintain—that would still be positive for gold."

As the Federal Reserve kicks off its two-day monetary policy meeting, markets are still pricing in a nearly 50/50 chance of a rate hike by the end of the year.