• BCA Research has turned more constructive on gold, arguing the recent selloff is nearing its end as real-yield headwinds fade.
  • The firm sees a weaker U.S. dollar as a tailwind, with central-bank buying and geopolitical risks providing long-term support.
  • Gold's momentum and reserve diversification trends reinforce the bullish case despite near-term macro uncertainties.

BCA Research is now telling clients to buy gold. In a note released Tuesday, the independent research firm said the precious metal's recent pullback is likely to run out of steam, as the drag from higher real yields diminishes. The call marks a shift from its previous caution and aligns with a growing chorus of strategists who see golden opportunities ahead.

At the heart of BCA's thesis is a simple but powerful driver: the U.S. dollar. With the greenback expected to weaken as the Federal Reserve pivots toward rate cuts, gold, which is priced in dollars, should become more attractive to overseas buyers. "We see the dollar as a key swing factor," wrote the analysts, who asked not to be named because the note is private. "As dollar momentum fades, gold should find its footing."

The firm also points to structural forces that go beyond the macro cycle. Central banks, particularly those in emerging markets, continue to diversify their reserves away from the dollar and into gold. This buying spree, combined with elevated geopolitical tensions from Eastern Europe to the Middle East, provides a "persistent bid" under the market, according to the note. "Gold is not just a hedge against inflation anymore; it's a hedge against geopolitical and financial fragmentation," the analysts added.

Market participants seem to be taking notice. Spot gold prices have edged higher this week, recovering from a sharp slide in early May that saw prices dip below $2,300 an ounce. The metal currently trades around $2,350, still well off its April record high near $2,400. Despite the recent volatility, gold is up nearly 12% year-to-date, outperforming most major asset classes.

Not everyone is convinced. Some traders argue that real yields, which have been sticky at elevated levels, could keep gold under pressure in the short term. The benchmark 10-year Treasury yield, after touching 4.7% in April, has eased slightly but remains above 4.5%, while inflation expectations have been contained. "If yields resume their climb, gold could take another hit," said one metals trader in New York, who requested anonymity. "But right now, the macro winds are shifting."

BCA's analysts acknowledge the near-term risks but emphasize that the medium-to-long-term backdrop is favorable. They point to gold's persistent uptrend, which has seen higher lows for over a year, as evidence of underlying strength. The firm's model also flags that when real yields stall, gold tends to rally, especially if the dollar is simultaneously losing ground. This combination, they argue, could be on the horizon.

The shift at BCA mirrors a broader repositioning among institutional investors. Hedge funds have increased their net long positions in gold futures, according to the latest Commodity Futures Trading Commission data, while exchange-traded funds backed by bullion have seen inflows for four consecutive weeks. This suggests that the so-called "smart money" is preparing for a bounce.

Some analysts, however, caution against reading too much into BCA's call. "Research firms often turn bullish at the wrong time," noted Carol Fein, a precious metals strategist at a European bank. "The market is notoriously tricky when it comes to timing. But if BCA's thesis is right, we could see a retest of the highs by year-end."

For now, BCA remains bullish, urging investors to buy on dips rather than chase rallies. "We are not calling for a straight line higher," the note says. "But the risk-reward is asymmetric to the upside." The firm's stance underscores a growing conviction that gold's rally, though tested, is far from over. As one analyst put it: "The dragons of debt and deficits are not going away. Gold is the shield."

This article was updated to clarify BCA Research's position and to include market reactions.