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Informist, Thursday, Jun. 25, 2026

MUMBAI – Even as the US-Iran peace deal continues to suffer from its opaqueness, the global gold market has shifted its focus to higher interest rates and tighter monetary policy of leading central banks. The Jun. 17 meeting of the Federal Open Market Committee left the interest rates unchanged, but ample indications were available that the rates may go up soon to tame inflation in that country.

That has brought down gold prices across countries. And many in the market expect prices to tend lower in the near future.

"After reaching record highs earlier this year, prices have fallen sharply, leaving gold in negative territory for the year. Rising Treasury yields, a stronger US dollar and weaker investor demand have weighed on the market, forcing investors to reassess the factors that drove the rally," ING Economics said in a report.

"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," it said.

It further said that higher treasury yields, a stronger dollar and weaker demand from exchange traded funds could weigh on gold for longer than earlier anticipations. Accordingly, it has cut its forecasts for the yellow metal. "We now expect gold to average $4,300 per ounce in the third quarter of 2026 and $4,600 per ounce in the fourth quarter, down from our previous forecasts of $4,850 per ounce and $5,000 per ounce, respectively."

Elaborating on the market turnback on gold, ING Economics said the primary driver behind gold's recent decline has been a significant repricing of interest rate expectations. "Following recent Fed communication, investors have pushed back expectations for monetary easing, driving Treasury yields higher and supporting the US dollar. This has created a less favourable backdrop for gold, which typically struggles when real yields rise and the dollar strengthens."

At the same time, geopolitical tensions have failed to generate the type of safe-haven inflows seen during previous periods of uncertainty. Instead, markets have focused on the inflationary implications of geopolitical developments and what they could mean for monetary policy, it said.

Trends in inflows into gold ETFs, too, seem to be reversing. Till recently, ETF investors were a major force behind gold's rally, helping push holdings to their highest level since 2022. However, sentiment shifted sharply in 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. Global gold ETF holdings are now around 1.5% below where they started the year. While recent inflows suggest selling pressure may be easing, ETF demand is likely to remain less supportive than it was in 2025."

However, central banks' demand for gold seems to be intact. Central banks and official institutions added around 244 tonnes of gold during the first quarter of 2026, ING Economics pointed out, and argued that the longer-term outlook for official sector demand remains constructive. According to the latest World Gold Council survey, 84% of central banks expect gold to account for a larger share of global reserves over the next five years, while nearly 90% expect official gold holdings to increase over the next 12 months, it said.

Nevertheless, the thinktank opined that the recent correction has been driven primarily by cyclical macroeconomic headwinds rather than a deterioration in gold's structural fundamentals. Central bank demand remains robust, reserve diversification continues, and geopolitical risks remain elevated. However, higher yields and weaker investor demand are proving more powerful headwinds than we previously anticipated, it added.

At 1420 IST, August contract of gold on COMEX traded at $4 007.97 per ounce, almost flat from their previous close. On MCX, the same month contract was at INR 142,200 per 10 grams, up 0.7%.  End

Reported by Abhijit Doshi

Edited by Akul Nishant Akhoury

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