A summer slump may have temporarily curtailed gold's upward momentum, but prices could still retest April's all-time high and even approach $4,000 an ounce by the end of the year, according to one market strategist.

Aakash Doshi, head of gold strategy at State Street Investment Management, said he still sees pullbacks in gold prices as buying opportunities. He noted that despite record high stocks, declining market volatility, high U.S. Treasury yields and some bullish attention on the dollar, gold is holding solid support above $3,300 an ounce.



He added that $3,000 an ounce has become the new benchmark level supporting gold prices, describing broader financial market sentiment as surface-level optimism.

“ Gold investors are waiting for the next catalyst, but there are other structural factors at play that support buying on dips ,” he said.

Doshi added that rather than focusing solely on the upward trend in gold prices, investors should examine the underlying strength of the market.

“To ask it another way, instead of asking why gold isn’t at $4,000 yet given it’s 26% up, maybe we should be asking why gold hasn’t actually fallen below $3,000 despite the stock market being at all-time highs and volatility being at its lowest level of the year,” he said.

Doshi said he expects gold prices to continue consolidating over the next month but will start to attract bullish attention after the Federal Reserve convenes its annual meeting in Jackson Hole, Wyoming. He expects Fed Chairman Jerome Powell to use the meeting to lay the groundwork for interest rate cuts starting in September and continuing through the end of the year.

Doshi said the gold market is well-positioned to benefit from interest rate cuts and rising inflationary pressures. Although geopolitical uncertainty has eased in recent weeks, the market is now turning its attention to rising government debt and inflation concerns.

Earlier this month, the U.S. government passed the most comprehensive appropriations bill in recent history. However, the Congressional Budget Office (CBO) said the massive tax cuts are expected to increase the deficit by nearly $4 trillion.

Meanwhile, trade deals with Japan and the European Union, which will increase import costs by 15%, are also expected to push up inflation.

Doshi noted that rising debt and stubborn inflation should weigh on economic growth, which would eventually force the Federal Reserve to ease its monetary policy.

“That’s already baked into their forecasts,” he said. “If you compare the June Statement of Economic Projections (SEP) to March, they lowered their growth forecasts and raised their inflation and unemployment forecasts. Listen to what the Fed itself says.”

In this stagflationary environment, State Street expects gold to remain a valuable diversifier . Doshi noted that rising inflation will lower real interest rates, making bonds less attractive.

At the same time, rising debt levels are causing sharp swings in the long-term bond yield curve, increasing gold's appeal as a safe-haven asset.

“If valuations remain elevated across most markets and uncertainty continues to hang over the long end of the yield curve, investors will embrace safe-haven assets and diversification tools like gold to hedge against these tail risks,” he said.


Spot gold daily chart Source: Yihuitong

At 11:06 Beijing time on July 30, spot gold was quoted at $3,327.67 per ounce.