SHIFTING macroeconomic conditions and easing geopolitical tensions are reshaping market sentiment and clouding gold\u2019s near-term outlook. After hitting record highs earlier this year, gold prices have begun to retreat, prompting a fresh question for investors: Has the metal\u2019s rally run its course, or is this merely a pause before the next surge?<\/p>\n
Below are eight key questions I address about the current state of the gold market. <\/p>\n
Was the recent high in gold a short-term peak?<\/p>\n
Gold has been one of the top performing assets in 2025, rising 28 per cent year-to-date (as at Jul 24, 2025) amid strong demand from investors and central banks.<\/p>\n
Prices peaked in late April, driven by tariffs, high uncertainty, and market volatility. Another high occurred in early May, which was influenced in part by a weaker US dollar, and a mid-June rise was largely fuelled by geopolitical risks.<\/p>\n
But since the April peak, gold has been trading mostly sideways within a wide and volatile range of US$3,200 to US$3,400 per ounce, losing a bit of momentum as of late. The metal appears to be supported in the medium term, given trade policy and economic uncertainty, the impact of tariffs on the US and world economies, and continuing central bank purchases.<\/p>\n
However, with the absence of a major geopolitical event that would typically drive investor demand higher, as well as slowing jewellery and coin purchases, we believe the strong upward momentum appears to have run its course. <\/p>\n
What drove gold\u2019s decline from its April 2025 peak of about US$3,500?<\/p>\n
In April, US-China tensions escalated sharply and as a result, tariffs were significantly increased on both sides of the Pacific. We saw increased volatility in the markets, a condition in which gold typically thrives. Investor demand increased substantially as a result.<\/p>\n
But since then, conditions have begun to improve. The May 12 joint statement regarding a tariff truce between the United States and China signalled progress, and tariffs have moderated. Meanwhile, cross-border hostilities between Iran and Israel seem to have eased with those countries\u2019 mutually agreed upon truce, at least in the short term. <\/p>\n
At the same time, we believe there are signs of softening jewellery and coin demand, largely due to high prices and volatility. In India, which is a key market for gold, consumer purchases seemed to be a bit slow during key festive events. While the total value of purchases remains high, this seems driven more by elevated prices than by quantity. <\/p>\n
Is this a temporary correction or a trend reversal?<\/p>\n
Despite heightened regional instability due to the Iran-Israel conflict, gold prices have failed to surpass their April highs. <\/p>\n
We believe central bank gold purchases gold buying was lower in the first quarter of 2025, both sequentially and on a year-over-year basis, suggesting that even though dollar diversification as a trend is likely to continue, high gold prices might disincentivise part of the demand from central banks.<\/p>\n
Investor positioning in exchange-traded funds (ETFs) have increased sharply this year, but the trend is not mirrored in futures. While there are enough catalysts to support gold prices at current levels, a sustaining rally from here might prove more challenging. <\/p>\n
Is gold headed to US$4,000 \u2013 or falling back to US$2,800?<\/p>\n
We see a wide range in gold price forecasts, from bullish US$4,000 targets to bearish calls near US$2,400 for 2026, which reflects underlying market uncertainty.<\/p>\n
To better understand momentum, we believe demand should be viewed across three segments: central banks, institutional investors, and physical demand for coin and jewellery. <\/p>\n
Since 2022, central banks have structurally increased gold holdings to help diversify away from the US dollar; many emerging market (EM) central banks still have room to expand allocations to gold. In contrast, elevated prices have begun to curb physical demand in gold.<\/p>\n
Investor demand has been very strong so far this year amid economic and geopolitical risks due to gold\u2019s perception as a safe haven. In our view, a strong upward momentum in gold from current levels would require investors to further increase their allocations \u2013 something we believe may be challenging.<\/p>\n
And, as always in periods of high commodity prices, supply and recycling are incentivised, which could limit the rally\u2019s upside potential.<\/p>\n
What would need to happen for gold to surpass its recent peak?<\/p>\n
A combination of weaker growth because of tariffs and an uptick in inflation could put the US Federal Reserve in wait-and-see mode, making the US dollar less attractive. This could be in favour of gold prices, as we believe gold remains a reliable hedge against uncertainty, recession, and stagflation risks.<\/p>\n
In addition, meaningful escalation in geopolitical conflicts or trade wars could be positive catalysts for a gold rally. <\/p>\n
We believe central bank gold purchases are also likely to continue, driven by dollar diversification due to persistent deficits and policy uncertainty in the United States. <\/p>\n
What would need to happen for gold to pull back even further?<\/p>\n
We\u2019re seeing signs that investors are trimming their gold exposure. Futures positioning has come down, and ETF holdings have started to taper off. <\/p>\n
If sentiment continues to improve and tariffs end up being less damaging to growth, we believe investors may rotate back into risk assets, which could weigh on gold prices. <\/p>\n
We\u2019ve also seen signs of weaker physical demand in key markets, such as India, as retail investors and consumers delay or reduce purchases on the back of high prices and volatility. <\/p>\n
Given market volatility, how reliable are gold price forecasts?<\/p>\n
So far in 2025, gold price forecasts have been revised four to five times in most major forecasting institutions, which is far more frequently than the usual quarterly or semiannual updates.<\/p>\n
This underscores how volatile and unpredictable the current environment is, making it especially difficult to rely solely on forecasts for investment decisions. <\/p>\n
Instead, we focus on fundamentals such as quarterly central bank purchases, gold reserves in central bank balance sheets, futures and ETF positioning, and gold\u2019s correlation with the US dollar. We also closely track economic and trade news to gauge sentiment and momentum.<\/p>\n
What should EM debt investors consider now?<\/p>\n
About 80 per cent of mined gold comes from EM countries, providing plenty of investment opportunities for investors in EMs.<\/p>\n
Our approach to investing in gold companies in EMs involves thorough research analysis on the company\u2019s operations and financials as well as the gold market as a whole. <\/p>\n
We also stress test gold miners\u2019 resilience across different price scenarios, focusing on companies that invest in reserve growth and expansion while managing downside risks. We believe the current environment presents good hedging opportunities for disciplined producers.<\/p>\n
The writer is senior corporate credit and sustainability analyst on William Blair\u2019s emerging markets debt team<\/p>\n","protected":false},"excerpt":{"rendered":"SHIFTING macroeconomic conditions and easing geopolitical tensions are reshaping market sentiment and clouding gold\u2019s near-term outlook. After hitting…\n","protected":false},"author":2,"featured_media":25619,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[64,63,99,171],"class_list":{"0":"post-25618","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-markets","8":"tag-au","9":"tag-australia","10":"tag-business","11":"tag-markets"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/25618","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=25618"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/25618\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/25619"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=25618"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=25618"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=25618"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}