- BIST10011,722-2.89%
- USD49.45+0.05%
- EUR55.62+0.37%
- GOLD4,181.10+0.26%
- INTEREST37.00%-1.00
- BITCOIN81,580+0.10%
- October 17, 202611°
- BIST10011,722-2.89%
- USD49.45+0.05%
- EUR55.62+0.37%
- GOLD4,181.10+0.26%
- INTEREST37.00%-1.00
- BITCOIN81,580+0.10%
- October 17, 202611°
Gold prices fall below $4,000 as dollar and rate expectations weigh
Gold prices have fallen below $4,000 due to a stronger U.S. dollar and expectations of a Federal Reserve rate hike. While central bank purchases continue, banks in China are restricting individual trading.
Gold prices in international markets have fallen below the $4,000 level, pressured by a stronger U.S. dollar and expectations that the Federal Reserve will tighten monetary policy.
According to the Wall Street Journal, the dollar's appreciation has made gold more expensive for buyers outside the U.S., while the prospect of a rate hike has triggered a sell-off among long-term investors.
As of Friday, spot gold was trading at $3,991, down 0.9%, hovering near its lowest levels since last November. The yellow metal has declined about 29% from its peak of $5,594.82 seen on January 29.
Inflation and dollar pressure persist
According to ANZ bank analysts, concerns that high inflation will persist have led to a reassessment of monetary policy expectations. The Fed's hawkish stance has weakened gold's portfolio diversification appeal.
Ole Hansen, Senior Commodity Strategist at Saxo Bank, said the break below $4,000 has dampened sentiment and deepened the correction from the January peak. Hansen noted that a strong dollar and outflows from gold-backed exchange-traded funds are the main sources of pressure on the market.
According to Saxo Bank data, gold is down 8.4% on a total return basis since the start of the year, but still up 18.5% over the 12-month period.
Re-establishing ties with traditional factors
The Wall Street Journal reported that the Fed's latest meeting has realigned gold's relationship with traditional dynamics. It noted that rising geopolitical risks are no longer sufficient to support gold on their own, as markets interpret the Fed's message as a readiness to prioritize price stability more.
Bloomberg reported that while the Fed kept rates unchanged, it signaled the possibility of a rate hike within the year, with nine officials forecasting at least one rate increase in 2026.
Central banks continue buying
According to a survey by the World Gold Council, central banks have accumulated an average of 1,000 tons of gold annually over the past four years. This is double the average of about 500 tons in the previous decade. 89% of survey respondents expect an increase in global central bank reserves over the next 12 months.
While 45% of participants anticipate their own institutions will increase gold holdings, 74% believe the dollar's share of global reserves will decline moderately or significantly within five years.
Restrictions on individual trading in China
According to a Bloomberg report, ICBC and Guangzhou Bank, two of China's largest banks, have begun shutting down services that facilitate precious metal trading for individual customers. ICBC announced it will suspend individual brokerage services on the Shanghai Gold Exchange after July 24.
Song Jiangchen, a researcher at the Guangdong Southern Gold Market Academy, said the move will not have a major impact because banks had already restricted the opening of new individual positions. The banks cited risk management as the reason for their decisions.
Major bank forecasts
On June 9, JP Morgan stated that central bank demand could push gold to around $6,000 by the end of 2026, with $6,300 possible in 2027. Goldman Sachs, however, lowered its end-2026 forecast from $5,400 to $4,900.
UBS also revised its end-2026 forecast down to $5,500 from $5,900, while maintaining a positive long-term outlook supported by central bank demand and reserve diversification. Morgan Stanley, in a note published in May, wrote that the path for gold to reach $5,200 is now more difficult.
Saxo Bank emphasized that for buyers to regain confidence, selling in gold-backed exchange-traded funds needs to subside and the dollar must lose momentum. The bank reported that precious metals are currently being driven more by positioning and technical factors than by fundamentals.
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