Has gold bottomed out? Three key predictions for the second half of 2026.
2026-06-26 20:30:59
On Friday (June 26), gold entered a technical bear market, briefly falling below the $4,000 mark. The interim peace agreement between the US and Iran reopened the Strait of Hormuz, causing energy prices to decline. However, the core PCE rate accelerated to 3.4% year-on-year in May, and Apple announced a 15-25% price increase due to soaring AI component costs, indicating that inflationary pressures are quietly accumulating from both war and infrastructure perspectives.
The market narrative this week is clear: geopolitical easing → energy price decline → reduced inflation expectations → waning demand for gold as a safe haven. The US dollar index hit a 13-month high, three major investment banks lowered their gold price targets, and ETFs continued to see outflows; everything seems to point to a "retreat of safe-haven assets."
However, focusing solely on these factors misses the structural changes brewing beneath the surface. European natural gas inventories are at only 46%, far below seasonal norms; TTF volatility reached 7% during the crisis, significantly exceeding Brent crude's 4.4%; and Asian countries, after more than 100 days of oil pipeline disruptions, are systematically adjusting their energy strategies. These clues all point to the same conclusion: current market pricing logic may underestimate the supply-demand imbalances expected in the second half of the year.
The core framework of this article does not rely on a single indicator, but cross-validates from three dimensions: geopolitics, inventory cycles, and inflation transmission, to help readers establish their own judgment coordinates.
I. The "Hawk Trap" of Gold
The immediate driver of gold's drop below $4,000 was the rising expectation of a Federal Reserve rate hike. CME FedWatch showed the market pricing in a 67% probability of a September rate hike, with the dollar strengthening in tandem. However, a counterintuitive detail is noteworthy: oil prices are falling sharply. This means that inflation readings may decline over the next 1-2 months, giving the Fed room to turn dovish. Analysts at Huasheng Heng Futures pointed out that once inflationary pressures ease, the Fed may quickly adjust its stance. In other words, the current "hawkish expectations" suppressing gold prices may have already been over-priced in. If gold finds support in the $3,500-$3,800 range, historically this area has often been a region where central bank gold purchases are concentrated.
II. Hormuz's "Fragile Peace"
The temporary ceasefire agreement between the US and Iran allows free passage through the Strait of Hormuz for 60 days, but this is more of a tactical respite than a strategic solution. The International Maritime Organization has suspended its evacuation plan due to a new round of attacks on ships, and shipping traffic is far from recovering to pre-war levels. More importantly, Iran has demonstrated its control over the world's most vital energy chokepoint through this crisis, and this leverage will not disappear with a temporary agreement. For investors, this means that the geopolitical risk premium will not completely subside—it has merely shifted from an "acute panic" to a "chronic reassessment" phase.
III. TTF Natural Gas: An Overlooked Time Bomb
If asked which asset has the tightest fundamentals in the second half of the year, the answer is most likely European natural gas. ICIS data shows that European inventories are only 46%, far below the policy threshold of 80% that must be reached before October. At the current injection rate, inventories will only reach around 70% by early November, leaving a shortfall of about 150 LNG shipments. Meanwhile, meteorological organizations have issued a 90% probability warning of El Niño, meaning that if a heat wave in Asia drives up cooling demand in Japan and South Korea, Europe will have to compete with Asian buyers for supplies. A key indicator in ICIS's analytical framework is the European LNG dependence ratio. This indicator rose to 1.62 in September, meaning that even with pipeline gas and domestic production running at full capacity, LNG will still be needed to fill the basic consumption gap. The TTF's responsiveness to geopolitical shocks (regression beta 1.11) is also higher than Brent crude (baseline 0.78), meaning that if supply tightens again, gas prices will be more volatile than oil prices.
IV. AI Inflation: The Next Structural Driver
The Hormuz crisis may be over, but investment in AI infrastructure is just beginning. Apple's 15-25% price increase is not an isolated incident—Cook attributes it to the "unprecedented" demand squeeze on storage and semiconductor components from AI data centers. Goldman Sachs predicts that data centers will contribute nearly half of the growth in US electricity demand, with residential electricity prices rising by about 6% annually. The characteristic of this round of cost transmission is that it is not a cyclical fluctuation, but a long-term structural increase. Core PCE accelerated to 3.4% year-on-year in May, and super-core services inflation (excluding housing) rose even higher to 3.9%, while the lagged transmission of war to consumer goods prices has not yet been fully reflected. The newly appointed economic advisor to Federal Reserve Chairman Warsh has attributed the rise in long-term interest rates to "adverse supply shocks and widening fiscal deficits," a judgment suggesting that the central interest rate may have structurally shifted upward.
V. Historical Context: Lessons from 1973
Some market observers have drawn parallels between this crisis and the 1973 oil embargo, but with a fundamental difference: back then, the world had no cheap alternatives to fossil fuels and could only "use oil more efficiently"; by 2026, solar power, electric vehicles, and nuclear energy will all be cost-competitive. After experiencing four-day workweeks, mandatory work-from-home orders, and industrial power rationing, Asian countries are accelerating investment in domestic alternative energy sources. This means that the damage to oil demand caused by this crisis may be permanent—not a collapse in total demand, but a structural slowdown in growth. The medium- to long-term ceiling for oil prices may be quietly being lowered by this crisis.
Short term (1-3 months):
Gold is likely to have formed a short-term bottom in the $3,500-$3,800 range. If Q3 inflation data falls due to declining oil prices, the Fed's hawkish expectations may ease, triggering a gold price rebound . TTF natural gas maintains a bullish bias during the peak summer injection period, and a confirmed El Niño event will amplify volatility. Brent crude oil is fluctuating in the $65-$75 range, and OPEC+ needs time to digest the uncertainty of Middle Eastern production recovery.
Medium to long term (6-12 months):
Once European natural gas inventories pass the winter stress test, the high premium of TTF may decline; however, if the winter is colder than usual or competition from Asian LNG intensifies, gas prices are expected to break through previous highs. The long-term logic for gold (central bank gold purchases, de-dollarization, and peak real interest rates) remains intact, and this deep correction may present a medium-term buying opportunity. For crude oil, attention should be paid to structural reductions in Asian demand, while increased production from non-OPEC+ countries will limit upside potential. The biggest variable comes from the AI-driven surge in electricity demand—it could become the main driver of inflation over the next 3-5 years, systematically raising the pricing center of energy-related assets such as copper, natural gas, and uranium.
Q1: Gold has fallen by 30%, is it a good time to buy now?
Short-term pressure on gold stems from a strong dollar and expectations of interest rate hikes, but both factors are self-limiting. Once falling oil prices lead to a decline in inflation data and the Federal Reserve signals a dovish shift, the dollar may weaken again. The $3500-$3800 range corresponds to approximately 58,000-61,000 Thai baht per baht in China, which is a key support level according to Huasheng Heng Futures. Historical experience shows that central bank gold purchases often accelerate after a sharp drop. However, bottom-fishing requires patience and waiting for technical confirmation of stabilization signals; left-side entry requires controlled position size.
Q2: Which poses a greater risk in the second half of the year: European natural gas or crude oil?
Upside risks: Natural gas > Crude oil. Natural gas has a clear time urgency to fill its inventory gap before winter, compounded by the possibility of El Niño shortening the window of opportunity. While crude oil also has inventory replenishment needs, increased non-OPEC+ production and demand disruption provide a buffer. Downside risks: Both exist, but natural gas has stronger downside support (seasonal essential demand).
Q3: Is the price increase of devices caused by AI a short-term phenomenon?
Most likely not. Capital expenditure cycles for AI infrastructure construction are typically measured in years, and the electricity demand for data centers is a long-term, incremental process. Price increases by end-user brands like Apple, Sony, and Microsoft indicate that cost pressures are being passed on from upstream semiconductors to end-consumer products. This means that AI is not only a "growth stock story," but also an important component of the "inflation narrative."
Q4: Does the underlying logic of central bank gold purchases still hold true?
China's gold imports surged 78% year-on-year to 692 tons in the first five months of the year, indicating that the diversification of official reserves under the trend of de-dollarization is still progressing. The short-term decline in gold prices does not change the structural driving force behind central bank gold purchases. During the previous gold price crash in 2013, Asian physical demand also surged against the trend, ultimately providing support for the bottom in 2015-2016.
Q5: What are the most easily overlooked risks in the current market?
The lagged effects of excessive interest rate hikes by the Federal Reserve. Core PCE has risen to 3.4% year-on-year, but the transmission of monetary policy typically has a 6-12 month lag. If the Fed continues to raise rates before seeing a pullback, it may over-tighten when the economy has already slowed, ultimately forcing a rapid shift. This "policy mistake" risk presents both an opportunity in bonds and a potential catalyst for gold.
Market Appearances and Underlying Logic
The market narrative this week is clear: geopolitical easing → energy price decline → reduced inflation expectations → waning demand for gold as a safe haven. The US dollar index hit a 13-month high, three major investment banks lowered their gold price targets, and ETFs continued to see outflows; everything seems to point to a "retreat of safe-haven assets."
However, focusing solely on these factors misses the structural changes brewing beneath the surface. European natural gas inventories are at only 46%, far below seasonal norms; TTF volatility reached 7% during the crisis, significantly exceeding Brent crude's 4.4%; and Asian countries, after more than 100 days of oil pipeline disruptions, are systematically adjusting their energy strategies. These clues all point to the same conclusion: current market pricing logic may underestimate the supply-demand imbalances expected in the second half of the year.
The core framework of this article does not rely on a single indicator, but cross-validates from three dimensions: geopolitics, inventory cycles, and inflation transmission, to help readers establish their own judgment coordinates.
Core Analysis
I. The "Hawk Trap" of Gold
The immediate driver of gold's drop below $4,000 was the rising expectation of a Federal Reserve rate hike. CME FedWatch showed the market pricing in a 67% probability of a September rate hike, with the dollar strengthening in tandem. However, a counterintuitive detail is noteworthy: oil prices are falling sharply. This means that inflation readings may decline over the next 1-2 months, giving the Fed room to turn dovish. Analysts at Huasheng Heng Futures pointed out that once inflationary pressures ease, the Fed may quickly adjust its stance. In other words, the current "hawkish expectations" suppressing gold prices may have already been over-priced in. If gold finds support in the $3,500-$3,800 range, historically this area has often been a region where central bank gold purchases are concentrated.
II. Hormuz's "Fragile Peace"
The temporary ceasefire agreement between the US and Iran allows free passage through the Strait of Hormuz for 60 days, but this is more of a tactical respite than a strategic solution. The International Maritime Organization has suspended its evacuation plan due to a new round of attacks on ships, and shipping traffic is far from recovering to pre-war levels. More importantly, Iran has demonstrated its control over the world's most vital energy chokepoint through this crisis, and this leverage will not disappear with a temporary agreement. For investors, this means that the geopolitical risk premium will not completely subside—it has merely shifted from an "acute panic" to a "chronic reassessment" phase.
III. TTF Natural Gas: An Overlooked Time Bomb
If asked which asset has the tightest fundamentals in the second half of the year, the answer is most likely European natural gas. ICIS data shows that European inventories are only 46%, far below the policy threshold of 80% that must be reached before October. At the current injection rate, inventories will only reach around 70% by early November, leaving a shortfall of about 150 LNG shipments. Meanwhile, meteorological organizations have issued a 90% probability warning of El Niño, meaning that if a heat wave in Asia drives up cooling demand in Japan and South Korea, Europe will have to compete with Asian buyers for supplies. A key indicator in ICIS's analytical framework is the European LNG dependence ratio. This indicator rose to 1.62 in September, meaning that even with pipeline gas and domestic production running at full capacity, LNG will still be needed to fill the basic consumption gap. The TTF's responsiveness to geopolitical shocks (regression beta 1.11) is also higher than Brent crude (baseline 0.78), meaning that if supply tightens again, gas prices will be more volatile than oil prices.
IV. AI Inflation: The Next Structural Driver
The Hormuz crisis may be over, but investment in AI infrastructure is just beginning. Apple's 15-25% price increase is not an isolated incident—Cook attributes it to the "unprecedented" demand squeeze on storage and semiconductor components from AI data centers. Goldman Sachs predicts that data centers will contribute nearly half of the growth in US electricity demand, with residential electricity prices rising by about 6% annually. The characteristic of this round of cost transmission is that it is not a cyclical fluctuation, but a long-term structural increase. Core PCE accelerated to 3.4% year-on-year in May, and super-core services inflation (excluding housing) rose even higher to 3.9%, while the lagged transmission of war to consumer goods prices has not yet been fully reflected. The newly appointed economic advisor to Federal Reserve Chairman Warsh has attributed the rise in long-term interest rates to "adverse supply shocks and widening fiscal deficits," a judgment suggesting that the central interest rate may have structurally shifted upward.
V. Historical Context: Lessons from 1973
Some market observers have drawn parallels between this crisis and the 1973 oil embargo, but with a fundamental difference: back then, the world had no cheap alternatives to fossil fuels and could only "use oil more efficiently"; by 2026, solar power, electric vehicles, and nuclear energy will all be cost-competitive. After experiencing four-day workweeks, mandatory work-from-home orders, and industrial power rationing, Asian countries are accelerating investment in domestic alternative energy sources. This means that the damage to oil demand caused by this crisis may be permanent—not a collapse in total demand, but a structural slowdown in growth. The medium- to long-term ceiling for oil prices may be quietly being lowered by this crisis.
Trend Outlook
Short term (1-3 months):
Gold is likely to have formed a short-term bottom in the $3,500-$3,800 range. If Q3 inflation data falls due to declining oil prices, the Fed's hawkish expectations may ease, triggering a gold price rebound . TTF natural gas maintains a bullish bias during the peak summer injection period, and a confirmed El Niño event will amplify volatility. Brent crude oil is fluctuating in the $65-$75 range, and OPEC+ needs time to digest the uncertainty of Middle Eastern production recovery.
Medium to long term (6-12 months):
Once European natural gas inventories pass the winter stress test, the high premium of TTF may decline; however, if the winter is colder than usual or competition from Asian LNG intensifies, gas prices are expected to break through previous highs. The long-term logic for gold (central bank gold purchases, de-dollarization, and peak real interest rates) remains intact, and this deep correction may present a medium-term buying opportunity. For crude oil, attention should be paid to structural reductions in Asian demand, while increased production from non-OPEC+ countries will limit upside potential. The biggest variable comes from the AI-driven surge in electricity demand—it could become the main driver of inflation over the next 3-5 years, systematically raising the pricing center of energy-related assets such as copper, natural gas, and uranium.
Frequently Asked Questions
Q1: Gold has fallen by 30%, is it a good time to buy now?
Short-term pressure on gold stems from a strong dollar and expectations of interest rate hikes, but both factors are self-limiting. Once falling oil prices lead to a decline in inflation data and the Federal Reserve signals a dovish shift, the dollar may weaken again. The $3500-$3800 range corresponds to approximately 58,000-61,000 Thai baht per baht in China, which is a key support level according to Huasheng Heng Futures. Historical experience shows that central bank gold purchases often accelerate after a sharp drop. However, bottom-fishing requires patience and waiting for technical confirmation of stabilization signals; left-side entry requires controlled position size.
Q2: Which poses a greater risk in the second half of the year: European natural gas or crude oil?
Upside risks: Natural gas > Crude oil. Natural gas has a clear time urgency to fill its inventory gap before winter, compounded by the possibility of El Niño shortening the window of opportunity. While crude oil also has inventory replenishment needs, increased non-OPEC+ production and demand disruption provide a buffer. Downside risks: Both exist, but natural gas has stronger downside support (seasonal essential demand).
Q3: Is the price increase of devices caused by AI a short-term phenomenon?
Most likely not. Capital expenditure cycles for AI infrastructure construction are typically measured in years, and the electricity demand for data centers is a long-term, incremental process. Price increases by end-user brands like Apple, Sony, and Microsoft indicate that cost pressures are being passed on from upstream semiconductors to end-consumer products. This means that AI is not only a "growth stock story," but also an important component of the "inflation narrative."
Q4: Does the underlying logic of central bank gold purchases still hold true?
China's gold imports surged 78% year-on-year to 692 tons in the first five months of the year, indicating that the diversification of official reserves under the trend of de-dollarization is still progressing. The short-term decline in gold prices does not change the structural driving force behind central bank gold purchases. During the previous gold price crash in 2013, Asian physical demand also surged against the trend, ultimately providing support for the bottom in 2015-2016.
Q5: What are the most easily overlooked risks in the current market?
The lagged effects of excessive interest rate hikes by the Federal Reserve. Core PCE has risen to 3.4% year-on-year, but the transmission of monetary policy typically has a 6-12 month lag. If the Fed continues to raise rates before seeing a pullback, it may over-tighten when the economy has already slowed, ultimately forcing a rapid shift. This "policy mistake" risk presents both an opportunity in bonds and a potential catalyst for gold.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
