Does gold have the upward momentum to challenge historical highs?
2026-07-07 19:14:27
Gold continues to face downward pressure from the Federal Reserve's interest rate policy, but the influx of new funds into global gold ETFs and the continuous large-scale gold purchases by central banks around the world can provide solid support for gold prices. The policy signals released in the upcoming FOMC meeting minutes may directly determine the next stage of spot gold price movement, and market traders are closely watching the wording of the meeting to adjust their long and short positions accordingly.
The tightening market expectations for Federal Reserve interest rate hikes have fundamentally limited the upside potential of the current gold rally. Precious metals themselves do not generate interest income; once the market anticipates the Fed maintaining high interest rates or further rate hikes, the opportunity cost of holding gold will rise accordingly. A large amount of speculative capital will shift to the US dollar and US Treasury assets, directly suppressing the upward momentum of gold prices.
The two core bullish factors that provide hedging support are: the continuous net inflow of funds into global gold ETFs and the continuous large-scale purchases of physical gold by central banks in many countries around the world. These two buying forces jointly support international gold prices.
Despite the escalating geopolitical conflict in the Middle East, the US dollar has failed to capitalize on this safe-haven appeal and stage a strong upward trend. Historically, the dollar has typically become the preferred safe-haven asset during geopolitical crises due to its status as a global reserve currency. However, the current situation in the Middle East has seen a significant diversion of funds. News of the tanker attack in the Strait of Hormuz has directly plunged the US-Iran nuclear negotiations into considerable uncertainty. Even with heightened geopolitical risks, Brent crude oil prices have only risen slightly, far less than previously anticipated. Simultaneously, the S&P 500 has resumed its strong rebound, and global risk appetite across asset classes has recovered, leading to a large influx of funds back into equity markets. This has diverted funds that were originally flowing into the dollar as a safe haven, and these multiple factors have collectively weakened the dollar's fundamental strength.
Current pricing in the futures market indicates a 75% probability of a Federal Reserve rate hike in 2026. Driven by this expectation, speculative traders have been accumulating net long positions in the US dollar, currently reaching their highest level since 2015. This extremely crowded long position structure also poses a risk of a dollar pullback. If expectations of a rate hike weaken, a concentrated liquidation of long positions could quickly depress the dollar exchange rate, leaving dollar long positions in a highly vulnerable state. Previously, former Fed official Kevin Warsh's policy rhetoric at the Sintra Forum was significantly more dovish than the market had anticipated, and coupled with the latest US non-farm payroll data falling far short of market expectations, these two negative signals for the dollar triggered a rapid rise in the euro/dollar exchange rate.
Cooling market expectations for a Federal Reserve rate hike have provided gold prices with some breathing room, allowing them to halt their decline and enter a period of consolidation. However, the looming risk of further rate hikes hangs like a sword of Damocles, continuously suppressing the precious metal's upside potential. High inflation stickiness in core global economies means that if inflation data rebounds, the likelihood of the Fed restarting rate hikes will increase rapidly, putting downward pressure on gold prices again. While the inflation risk from energy supply shocks has gradually subsided, two long-term inflation drivers remain: rising supply chain costs due to massive capital investment in the global artificial intelligence sector, and periodic price increases caused by frequent extreme weather disruptions to global commodity supply chains.
Market concerns about a potential tightening of monetary policy by the Federal Reserve have led most institutions to predict that gold prices will struggle to challenge previous historical highs in 2026, with a clear ceiling on short-term upward momentum. However, HSBC maintains a bullish outlook for the medium to long term. The bank believes that the combined forces of demand for gold as a core safe-haven asset for portfolio diversification, the continued influx of new funds into gold ETFs, and central banks' continued increased purchases of physical gold bars are sufficient to drive precious metal prices into a medium- to long-term upward trend.
Official data released by the World Gold Council also confirms the central bank gold buying spree: in May, global central bank gold reserves increased by 41 tons month-on-month, with many countries simultaneously increasing their physical gold purchases. Emerging markets and some established European economies continued to show strong interest in buying gold, using this to hedge against exchange rate and geopolitical risks associated with relying solely on dollar-denominated assets. Poland and China were the two largest buyers of gold that month. From the beginning of the year to the end of May, Poland purchased a total of 64 tons of gold, Uzbekistan increased its holdings by 33 tons, China purchased 25 tons, and Kazakhstan purchased 20 tons. Central banks in many countries have adopted a continuous, phased gold purchase model, rather than a one-time large-scale purchase, forming a long-term and stable support for physical gold demand.
HSBC further analyzed that in the short term, a strong US dollar index and continuously rising US Treasury yields will continue to put downward pressure on gold. Higher US Treasury yields will further amplify the holding costs of non-interest-bearing gold, and institutional investors' willingness to allocate gold will continue to weaken in the short term. The future price trend of gold depends primarily on the futures market's re-adjustment of its pricing expectations for the medium- to long-term trend of the US federal funds rate. At this crucial juncture, all clues released in the June FOMC meeting minutes—including policy inclinations, official disagreements, and assessments of inflation and employment—will become the core basis for the market to repric the Fed's interest rate path, inevitably profoundly affecting the short-term price fluctuations of gold.
The tightening market expectations for Federal Reserve interest rate hikes have fundamentally limited the upside potential of the current gold rally. Precious metals themselves do not generate interest income; once the market anticipates the Fed maintaining high interest rates or further rate hikes, the opportunity cost of holding gold will rise accordingly. A large amount of speculative capital will shift to the US dollar and US Treasury assets, directly suppressing the upward momentum of gold prices.
The two core bullish factors that provide hedging support are: the continuous net inflow of funds into global gold ETFs and the continuous large-scale purchases of physical gold by central banks in many countries around the world. These two buying forces jointly support international gold prices.
Despite the escalating geopolitical conflict in the Middle East, the US dollar has failed to capitalize on this safe-haven appeal and stage a strong upward trend. Historically, the dollar has typically become the preferred safe-haven asset during geopolitical crises due to its status as a global reserve currency. However, the current situation in the Middle East has seen a significant diversion of funds. News of the tanker attack in the Strait of Hormuz has directly plunged the US-Iran nuclear negotiations into considerable uncertainty. Even with heightened geopolitical risks, Brent crude oil prices have only risen slightly, far less than previously anticipated. Simultaneously, the S&P 500 has resumed its strong rebound, and global risk appetite across asset classes has recovered, leading to a large influx of funds back into equity markets. This has diverted funds that were originally flowing into the dollar as a safe haven, and these multiple factors have collectively weakened the dollar's fundamental strength.
Current pricing in the futures market indicates a 75% probability of a Federal Reserve rate hike in 2026. Driven by this expectation, speculative traders have been accumulating net long positions in the US dollar, currently reaching their highest level since 2015. This extremely crowded long position structure also poses a risk of a dollar pullback. If expectations of a rate hike weaken, a concentrated liquidation of long positions could quickly depress the dollar exchange rate, leaving dollar long positions in a highly vulnerable state. Previously, former Fed official Kevin Warsh's policy rhetoric at the Sintra Forum was significantly more dovish than the market had anticipated, and coupled with the latest US non-farm payroll data falling far short of market expectations, these two negative signals for the dollar triggered a rapid rise in the euro/dollar exchange rate.
Cooling market expectations for a Federal Reserve rate hike have provided gold prices with some breathing room, allowing them to halt their decline and enter a period of consolidation. However, the looming risk of further rate hikes hangs like a sword of Damocles, continuously suppressing the precious metal's upside potential. High inflation stickiness in core global economies means that if inflation data rebounds, the likelihood of the Fed restarting rate hikes will increase rapidly, putting downward pressure on gold prices again. While the inflation risk from energy supply shocks has gradually subsided, two long-term inflation drivers remain: rising supply chain costs due to massive capital investment in the global artificial intelligence sector, and periodic price increases caused by frequent extreme weather disruptions to global commodity supply chains.
Market concerns about a potential tightening of monetary policy by the Federal Reserve have led most institutions to predict that gold prices will struggle to challenge previous historical highs in 2026, with a clear ceiling on short-term upward momentum. However, HSBC maintains a bullish outlook for the medium to long term. The bank believes that the combined forces of demand for gold as a core safe-haven asset for portfolio diversification, the continued influx of new funds into gold ETFs, and central banks' continued increased purchases of physical gold bars are sufficient to drive precious metal prices into a medium- to long-term upward trend.
Official data released by the World Gold Council also confirms the central bank gold buying spree: in May, global central bank gold reserves increased by 41 tons month-on-month, with many countries simultaneously increasing their physical gold purchases. Emerging markets and some established European economies continued to show strong interest in buying gold, using this to hedge against exchange rate and geopolitical risks associated with relying solely on dollar-denominated assets. Poland and China were the two largest buyers of gold that month. From the beginning of the year to the end of May, Poland purchased a total of 64 tons of gold, Uzbekistan increased its holdings by 33 tons, China purchased 25 tons, and Kazakhstan purchased 20 tons. Central banks in many countries have adopted a continuous, phased gold purchase model, rather than a one-time large-scale purchase, forming a long-term and stable support for physical gold demand.
HSBC further analyzed that in the short term, a strong US dollar index and continuously rising US Treasury yields will continue to put downward pressure on gold. Higher US Treasury yields will further amplify the holding costs of non-interest-bearing gold, and institutional investors' willingness to allocate gold will continue to weaken in the short term. The future price trend of gold depends primarily on the futures market's re-adjustment of its pricing expectations for the medium- to long-term trend of the US federal funds rate. At this crucial juncture, all clues released in the June FOMC meeting minutes—including policy inclinations, official disagreements, and assessments of inflation and employment—will become the core basis for the market to repric the Fed's interest rate path, inevitably profoundly affecting the short-term price fluctuations of gold.
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