The gold market ended last week at $4,127.60 an ounce, a decline of 0.12% on the day and 1.43% on the week, leaving the precious metal 26.64% below its January record of $5,626.80. Since the start of the year, bullion has lost 4.93%. Beneath the surface, however, two powerful and contradictory forces are pulling in opposite directions: central banks are stockpiling at an aggressive pace while institutional investors are dumping exchange-traded funds at a rate not seen in over a decade.
Poland’s central bank confirmed on July 9 that it has purchased 82 tonnes of gold this year, deliberately using price dips to build its reserves. The bank now holds 632.4 tonnes and has set a medium-term target of 700 tonnes. Globally, central banks bought a net 41 tonnes in May, according to the World Gold Council, driven by a desire to hedge geopolitical risk and reduce dollar dependence. But this steady state buying is being offset by heavy selling from ETF investors. Globally, physically backed gold ETFs saw $8.9 billion in outflows in June, equivalent to 74 tonnes of bullion. North America accounted for the bulk, with $5.5 billion exiting the region. For the first half of the year, North American outflows totaled $7.7 billion — the weakest start to a year since 2013. Meanwhile, Asia provided a stark contrast, with a record $12 billion flowing into gold ETFs over the same period.
The divergence reflects a fundamental shift in the monetary policy outlook. At the Federal Reserve’s June 17 meeting — the first chaired by Kevin Warsh — the FOMC held the federal funds rate steady at 3.50%–3.75% for the fourth consecutive time, on a unanimous 12-0 vote. Markets had braced for a dovish signal, but instead the updated dot plot delivered a hawkish surprise. The median projection now puts the year-end rate at 3.8%, implying a quarter-point hike, a complete reversal from the March forecast that had penciled in a cut. Nine of the 18 participants expect rates to end 2026 above current levels, with six of those anticipating two increases. The central bank also raised its 2026 PCE inflation forecast sharply from 2.7% to 3.6%, reflecting persistent price pressures — the U.S. consumer price index stood at 4.2% in May.
This hawkish pivot has reshaped market expectations. Interest rate futures now price in a 63% probability of a hike at the September FOMC meeting, up from 54% a week earlier, while the odds of an October move stand at roughly 61%. Higher rates erode gold’s appeal as a non-yielding asset by raising its opportunity cost. The coming week will provide the next major test: Warsh delivers his semiannual testimony to Congress on July 14 and 15, and the U.S. inflation data due out in the same period will either reinforce or undermine the tightening narrative. If the CPI print comes in hotter than forecast, the pressure on gold is likely to intensify.
Should investors sell immediately? Or is it worth buying Gold?
Analyst views remain split. HSBC lowered its 2026 and 2027 price forecasts on July 10, citing a more restrictive Fed and a stronger dollar. Bernstein, by contrast, raised its 2026 target to $4,533, betting on persistent central bank buying and a more moderate rate path. Metals Focus expects consolidation through the summer followed by a potential rally in the second half, while the World Gold Council pegs fair value at roughly $4,100 with a plus-or-minus 5% range for the second half.
The chart pattern offers a mixed signal. After touching a low of $3,942 on June 30, gold posted a higher low at $4,021, suggesting buying interest in the $3,940–$4,040 zone. Still, the metal trades 5.45% below its 50-day moving average of $4,365.48 and 9.07% below its 200-day moving average of $4,539.11. The relative strength index sits at 44, neither overbought nor oversold but clearly tilted to the bearish side. Seasonally, gold often bottoms in June or July after a weak spring, then follows with a summer rally into September or October. Whether that pattern holds will depend on whether the Fed’s hawkish posture softens — or whether inflation forces it to follow through on its dot plot projections.
Geopolitical developments added a volatile twist last week. Fresh tensions between the U.S. and Iran sent crude oil prices surging more than 7%, stoking inflation fears and strengthening expectations for tighter Fed policy. By the end of the week, signs of de-escalation emerged, the dollar firmed, and gold came under additional pressure. Any further resolution — particularly regarding the Strait of Hormuz — could weigh on oil and reduce one source of upward pressure on inflation, potentially taking some heat off the Fed.
The next FOMC meeting on July 28–29 will not include fresh economic projections, keeping the focus squarely on incoming data. If inflation remains sticky above 4%, the case for a rate hike will solidify, keeping gold on the defensive. But with central banks still buying and Asian ETF demand setting records, the selling from North American institutional investors may yet find a floor — if only temporarily.
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