While the long-term outlook for gold may be positive, I believe we are experiencing a healthy breather.
In the near term, gold remains primarily driven by real yields, USD direction, and Fed policy expectations, with recent price action clearly reflecting the headwind from rising real yields and a stronger USD.
On rate pricing, gold has pretty much priced in the risk of further Fed tightening, as evidenced by its correction alongside rising hike expectations and a firmer USD, but it likely has not fully absorbed a sustained “higher-for-longer” real yield regime, meaning further upside in real yields would still pose downside risk.
Despite the hawkish Federal Open Market Committee (FOMC) meeting earlier this month, I don’t think the Fed is going to hike rates which means the upward trend in yields may be limited. US growth is improving but still below trend growth.
Oil prices are approaching pre-Iranian crisis levels, inflation expectations are anchored, the labor market remains soft and the US economy is not over-heating. I expect inflation to have or will soon peak in the US.
Longer-term bullish thesis remains intact
That said, the longer-term bullish thesis remains intact because the key drivers have shifted from cyclical to structural.
A changing global order, weaker confidence in traditional safe assets like USD and Treasuries, and ongoing reserve diversification all continue to underpin demand for gold as a strategic allocation, even if the path forward is more volatile and less linear.
More so, gold continues to be supported by structural forces - notably price-insensitive central bank buying, geopolitical risk premia, and strong retail demand.
For example, the World Gold Council published a survey in June 2026 that showed 84% of central bank respondents indicating that they planned to increase their gold holdings over the next five years.1
Investment risks
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested. Gold and other commodity prices are volatile and influenced by macroeconomic factors.
