Gold's momentum might have slowed in recent weeks, but writing off its broader trajectory would be premature.

Despite the volatility, largely caused by the outbreak of the U.S.–Iran war, institutions like Wells Fargo still see gold as a compelling medium-term opportunity, rather than a trade that has run its course.

Gold's recent pullback was in complete contrast to its blistering run. In 2025, yellow metal was a standout performer as strong central bank purchases, lingering inflation concerns, and elevated geopolitical tensions fueled the rally.

The strength carried into early 2026, before the sentiment shifted. March's performance was the worst since 2008, as war-driven inflation erased the rate cut expectations. Since then, the market has recovered, and SPDR Gold Trust (NYSE:GLD) is currently up 11% year-to-date.

Debasement Marches On

Still, for institutional players, the bigger picture remains intact owing to the "debasement trade."

Debasement doesn't happen overnight. A structural shift from fiat currencies such as the U.S. dollar toward neutral reserve assets like gold takes time.

Currency debasement happens when governments expand the money supply or accrue debt in ways that erode purchasing power. Those actions force central banks and institutions to invest in hard assets that can't be printed or politically weaponized.

"We're in the fourth currency debasement cycle, which started in 2022," Ohsung Kwon, Wells Fargo's Chief Equity Strategist, said per CNBC.

"Looking at the three drivers, all of them suggest that currency debasement will deepen further from current levels," he added.

M2/gold ratio is a key component of Kwon's analysis. M2 is the measure of the money supply, including cash, checking deposits, savings accounts, and other liquid investments.

When currency supply growth outpaces hard-asset valuation, it signals upside for bullion as it starts to catch up.

A Clear Trend

The Federal Reserve data support Kwon's optimism. A long-term trend shows how M2 increased from 3,661.9 billion in February 1996 to 22,667.3 billion in February 2026 (the latest official data point).

Data shows a clear M2 increase of at least 80% every 10 years. Such a trend also confirms Kwon's assumption that debasement cycles emerge during periods of economic stress and last, on average, about 8.5 years.

Thus, if the current cycle started in 2022 amid geopolitical stress and aggressive monetary tightening, we're still less than 4 years in. Thus, the current cycle has not yet reached its midpoint.

Therefore, Wells Fargo's optimism is not unsubstantiated. The bank sees how, in four out of five economic scenarios, further debasement drives gold higher. Its price target now stands at $8,000 per ounce by 2027—implying more than 60% upside from recent levels near $4,800.

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