With gold hovering around $4,000 an ounce levels and its near-term environment challenging, the precious metal’s price outlook has been lowered by investment banks and rating agencies.

“While we remain constructive on gold over the medium term, the near-term environment has become more challenging. As a result, we are lowering our gold price forecasts,” said Ewa Manthey, Commodities Strategist at ING Think.  It is the economic and financial analysis wing of the Dutch Multinational Financial Services firm, ING. 

“We continue to forecast an annual average of $4,600/oz for 2026 for now, with near-term price dynamics likely to be driven by Fed policy signals, rendering the precious metal susceptible to a repricing of market expectations and renewed dollar strength in the short term,” said research agency BMI, a unit of Fitch Solution.

Significant bearish risk

Fed policy could significantly shape the trajectory of gold prices, said American multinational financial service firm JP Morgan. “The most significant bearish risk to our view is a macro scenario where US growth and employment remain buoyant but inflation continues to accelerate, solidifying a Fed hiking cycle this year,” said  Greg Shearer, head of Base & Precious Metals at J.P. Morgan .  

Manthey said ING Think expects gold to average $4,300/oz in the third quarter of 2026 and $4,600/oz in the fourth quarter, down from its previous forecasts of $4,850/oz and $5,000/oz, respectively. 

A bullish JP Morgan expects gold to average $5,300 an ounce in the third quarter and $6,000 in the fourth quarter, lowered from its earlier outlook of $5,900 and $6,300, respectively. 

On Friday, gold was quoted at $4,053 an ounce, down over 2 per cent from a week ago and 9 per cent month-on-month. The yellow metal has shed over 25 per cent after it soared to a record high of $5,608 an ounce on January 29. It has been declining since the Iran war broke out on February 28.

3 factors weighing on gold

BMI said gold has come under significant pressure, weighed down by Fed tightening bets and a firmer dollar. Rate-hike expectations have gained traction following the Fed’s hawkish tone, signalling the possibility of rate hikes in 2026 after keeping interest rates unchanged at 3.5-3.75 per cent at its June 16-17 meeting, leaving the yellow metal exposed to a notable setback.

Higher yields, a stronger dollar and weaker ETF demand are likely to weigh on gold longer than anticipated, said Manthey. 

Shearer said gold is stuck in a bit of a technical “no-man’s land”, trudging above the 200-day moving average around $4,340 and capped, for now, below the 50-day moving average at $4,730/oz. 

“Amid this sideways plod, and with growing worries that the Fed might have to respond to energy-driven inflation with hikes, gold is on the back burner for most investors at the moment,” he said. 

Shifting market focus

BMI said the US Fed may not move on interest rates this year. “As long as conflict-related inflation pressures begin to fade, given the recent US-Iran agreement, the most likely outcome remains a prolonged hold,” it said.

ING Think’s Manthey said the current sell-off in gold 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 haven demand towards the implications of higher interest rates and tighter financial conditions,” she said.

J.P. Morgan’s Shearer said the way the Iran war has unfolded reinforces many of the themes driving demand for diversification into gold.  

“These themes are on hold until more clarity arrives around a resolution of the Iran conflict, which removes some of the tail risks for energy prices, inflation and yields,” he said. 

‘No real yield’

Elevated yields and a strong dollar are likely to remain near-term headwinds for gold, said Manthey, adding that the primary driver behind the precious metal’s recent decline has been a significant repricing of interest rate expectations. 

Shearer said the pace of central banks’ buying of gold, which drove the yellow metal since 2024, seems to have cooled at least on the surface. However, China has reportedly made “unreported” purchases of gold.

J.P. Morgan’s head of base and precious metals said gold serves as a debasement hedge against the loss of a currency’s purchasing power due to inflation or currency debasement. “But because it has no real yield, it tends to perform poorly in markets where the yield on assets (like U.S. Treasuries or money market funds) is set to go up,” he said.

Pointing out that investors in gold exchange-traded funds (ETFs) were a major force behind the gold rally at the start of the year, the ING Think commodities strategist said their sentiments shifted after March as investors reassessed the outlook for US monetary policy. 

“Rising yields and a stronger dollar triggered profit-taking, particularly among North American investors, leading to a reversal in ETF flows,” she said.

Published on June 26, 2026