The gold market is experiencing a difficult period when the correction momentum from a historical peak has turned into a prolonged sell-off wave, causing a series of important support levels to be broken one after another. Some experts warn that below the 4,000 USD/ounce mark, there are no longer many technical support zones strong enough to prevent the decline of precious metals.
Stepping into the second half of the year, a series of international financial institutions simultaneously lowered their short-term gold price forecasts as the monetary policy outlook of the US Federal Reserve (Fed) became tougher. However, the noteworthy point is that most still maintain a positive outlook for gold in the long term.
The Bank of America (BofA) has not given up its gold price target of 6,000 USD/ounce. According to this bank, the above scenario can still happen but requires more time instead of being achieved in a short time as previously expected.
Meanwhile, BMO Capital Markets has lowered its average gold price forecast by about 5% this year. However, the Canadian bank still expects gold prices to reach the 5,000 USD/ounce mark in the first quarter of next year.
According to experts, the biggest pressure on gold currently comes from the continued increase in short-term US Treasury bond yields, thereby strengthening the strength of the USD.
The Fed's reaffirmation of its priority in controlling inflation has helped anchor market inflation expectations. Along with investors increasingly believing that the Fed will have at least one more round of interest rate hikes before the end of the year, real interest rates continue to rise, increasing the opportunity cost of holding gold – an asset that does not yield yields.
Another factor putting pressure on the precious metal is the wave of investment in artificial intelligence (AI). Strong capital inflows into this sector have contributed to maintaining the resilience of the US economy to shocks from energy prices and the global economic environment, while attracting more cash flow back to USD assets.
The recovery of the greenback therefore continues to create resistance for gold prices in the short term.
However, many experts believe that the factors that once brought gold prices to a record high at the beginning of the year have not disappeared.
The fragmentation process of the global economy continues to take place, prompting many countries to diversify foreign exchange reserves and reduce dependence on the USD in the context of the world's monetary system becoming increasingly multipolar.
The latest annual survey by the World Gold Council (WGC) shows that 89% of foreign exchange reserve managers believe that gold holdings held by central banks globally will continue to increase in the next 12 months. Notably, 45% of surveyed organizations said they also plan to increase gold reserves - the highest level ever.
In addition, public debt in many developed economies continues to increase. According to experts, history shows that countries with a large debt burden often have to accept a period of high inflation or maintain loose fiscal policies for a long time to reduce the real value of debts.
If this scenario continues to repeat, gold and tangible assets are likely to continue to play an important role in preserving investor purchasing power.
Experts also noted that although gold prices may still fluctuate strongly in the short term under the influence of the USD, bond yields and Fed policy, the strategic role of precious metals in the investment portfolio remains unchanged.
Accordingly, the current adjustments mainly reflect changes in market valuation, while long-term gold support drivers are still maintained.
