Expectations that the US Federal Reserve (Fed) will continue to tighten monetary policy along with the strengthening of the USD are weakening the drivers that once boosted the historic gold price increase since 2023, causing the precious metal to face a lot of pressure when fluctuating around the threshold of 4,000 USD/ounce.
After setting a record of 5,595 USD/ounce in January this year, spot gold prices have fallen by about 25%. This strong correction raises questions about the ability to maintain a long-term uptrend cycle for the precious metal, although many long-term supporting factors are still present.
Mr. Aakash Doshi - Head of Gold and Metals Strategy at State Street Investment Management - said that in the short term, the market still faces pressure from the risk of rising interest rates and a stronger USD.
In the short term, the market needs to absorb the risk that the Fed may raise interest rates as well as the stronger impact from the USD," he said.
According to Mr. Doshi, gold prices may recover if energy prices cool down and inflationary pressures subside. In the long term, gold still benefits from the demand for diversification of reserves, prolonged budget deficits in many economies and the role of value-preserving assets.
As of June 15, gold prices traded around 4,339.74 USD/ounce, after falling to 4,022 USD/ounce at one point - the lowest level since November last year.
Positive US job data released last week increased expectations that the Fed would maintain a tougher stance on interest rates. This caused gold prices to break through the 200-day moving average for the first time in more than two and a half years.
Currently, the 200-day moving average is around the 4,446 USD/ounce range and is becoming an important resistance level for the market.
A precious metal trader commented that the loss of this technical threshold shows that the market structure has changed significantly compared to the previous price increase period.
In 2025, gold prices once increased by 64% - the strongest increase in 46 years.
According to Adrian Ash – Research Director at BullionVault, the market may have underestimated the role of interest rate cut expectations in last year's strong gold rally.
It seems that a significant part of the previous strong gold rally comes from expectations that the Fed will ease monetary policy," he said.
Data from the market shows that there is still much room for short selling positions to increase if pessimistic sentiment continues to spread.
Ms. Suki Cooper - Analyst at Standard Chartered estimates that at least 270 tons of gold in ETFs are in a loss-making state as prices fall below 4,250 USD/ounce.
If gold falls to $4,000/ounce, gold holdings in a loss-making state could increase to about 298 tons.
Gold ETFs recorded a net withdrawal of about 16 tons in May and an additional 7 tons in the first week of June, reflecting investors' cautious sentiment.
Meanwhile, physical gold demand is also at a seasonal low point. In many large consumption markets, buying and selling activities have not shown signs of strong recovery.
Ms. Nicky Shiels - Head of Metal Strategy at MKS PAMP forecasts that gold prices are likely to fluctuate in a narrow range in the next few months.
We believe that gold will continue to trade in the accumulation zone before strong enough momentum appears to form a new trend," she said.
Although the short-term outlook still faces many challenges, most experts believe that the fundamental factors supporting gold in the long term have not changed significantly. This means that the current adjustments may be mainly technical and reflect the adjustment of market interest rate expectations rather than the complete reversal of the long-term trend.
