Gold’s remarkable bull run has lost significant momentum, with prices falling to around $4,000 an ounce, extending a sharp correction that has forced some of Wall Street’s biggest banks to abandon their once-aggressive bullish forecasts and acknowledge that a rapid return to record highs has become increasingly unlikely.
The precious metal was trading at about $4,025 per troy ounce early Friday, leaving bullion down for the year and roughly 30% below the intraday record of nearly $5,600 an ounce reached in late January. The decline marks a dramatic reversal for an asset that had been one of the world’s strongest-performing investments over the previous two years.
Gold’s retreat follows an extraordinary rally that saw spot prices more than double from around $2,000 an ounce at the start of 2024, fueled by central bank purchases, geopolitical tensions, expectations of lower U.S. interest rates, and heavy investor demand for safe-haven assets.
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The mood has since shifted sharply as investors increasingly focus on the prospect of tighter U.S. monetary policy rather than geopolitical uncertainty.
A stronger U.S. dollar and growing expectations that the Federal Reserve will keep interest rates elevated for longer, or even raise borrowing costs further to contain inflation, have significantly reduced gold’s appeal. Because bullion generates no income, higher interest rates increase the attractiveness of interest-bearing assets such as Treasury bonds while also lifting the opportunity cost of holding gold.
The stronger dollar has compounded the pressure by making dollar-denominated bullion more expensive for overseas buyers, weighing on physical demand across key markets.
“The sell-off may appear surprising given ongoing geopolitical uncertainty and continued central bank buying. However, gold’s weakness highlights the extent to which markets have shifted their focus from safe-haven demand towards the implications of higher interest rates and tighter financial conditions,” Ewa Manthey, commodity strategist at ING, wrote on Thursday.
Manthey added that higher bond yields, a firmer dollar, and softer investor demand are likely to keep gold under pressure longer than previously anticipated.
Reflecting that outlook, ING cut its price forecasts, now expecting gold to average $4,300 an ounce in the third quarter of 2026 and $4,600 in the fourth quarter. Those projections are substantially below its earlier forecasts of $4,850 and $5,000, respectively.
ING is not alone in reassessing the outlook. Earlier this week, Deutsche Bank also downgraded its forecasts, reducing its third-quarter estimate by more than 20% to $4,300 an ounce while cutting its fourth-quarter projection by 17% to $4,800, according to analyst Michael Hsueh.
“The usual suspects which might provide support via investment demand are notably absent, for now,” Hsueh wrote, citing weaker inflows into gold-backed exchange-traded funds as well as softer physical buying from China and India.
Those two countries account for the world’s largest consumer demand for physical gold, making any slowdown in purchases a significant headwind for prices.
The downgrade also follows a similar move by Goldman Sachs, which last week reduced its year-end target by $500 to $4,900 an ounce after abandoning its earlier expectation that the Federal Reserve would cut interest rates this year.
Meanwhile, Bank of America, which has maintained one of the most optimistic outlooks on Wall Street with a 12-month target of $6,000 an ounce since January, recently acknowledged that achieving that level now “looks unlikely for now.”
The wave of forecast revisions underscores how quickly sentiment has shifted in the gold market.
Only a few months ago, many analysts expected bullion to continue setting successive record highs as geopolitical conflicts, central bank diversification away from the U.S. dollar, and anticipated Fed easing combined to create what many viewed as a structurally bullish environment.
That optimism has faded as persistent inflation and resilient economic data have prompted markets to reassess the outlook for U.S. monetary policy. Futures markets have significantly reduced expectations for near-term interest-rate cuts, while some investors have even begun pricing in the possibility of further tightening if inflation proves more persistent.
The change in expectations has lifted Treasury yields and strengthened the dollar, two developments that historically create a difficult backdrop for gold.
Even so, analysts caution that the longer-term structural drivers supporting bullion have not disappeared entirely. Central banks continue to diversify reserve holdings, geopolitical tensions remain elevated across several regions, and concerns over government debt levels in major economies could still revive safe-haven demand if financial conditions deteriorate.
For now, however, investors appear to be prioritizing higher real yields over traditional defensive assets, suggesting gold may struggle to regain its record highs until there is clearer evidence that U.S. monetary policy is turning more accommodative or geopolitical risks intensify enough to trigger another sustained flight to safety.