Gold prices are likely to consolidate around $4,000/ounce this summer, awaiting clear guidance from the Federal Reserve's monetary policy. Aakash Doshi, head of gold strategy at State Street Asset Management, believes the market's current expectations for Fed rate hikes are overly aggressive, and hawkish expectations may have peaked. While high 10-year real yields are suppressing gold price rebounds, with the $4,100 level remaining a resistance, the $4,000 support level is strong. In the medium to long term, the logic of continued global central bank gold purchases, strong physical demand from major Asian countries, and record-high global debt levels remains unchanged, with the baseline expectation for gold prices to reach $4,750-$5,500 over the next 6-9 months . Non-farm payroll data and US Treasury yield expectations will be key catalysts for short-term price movements.

Short-term market outlook: The oscillating pattern continues, awaiting policy signals from the Federal Reserve.

Gold prices have repeatedly attempted to hold above $4,100 but have failed, remaining trapped in a range-bound trading pattern. The current 10-year real yield has risen to around 2.4%, approaching its highest level since October 2023, and this high real yield continues to be a major negative factor for gold. However, market expectations for a hawkish stance from the Federal Reserve regarding tightening policy have likely peaked. Institutions have already priced in rising real yields, and the Fed is likely to remain on hold this year. Until the outlook for monetary policy becomes clearer, gold prices are unlikely to break out of their current trend, with the core consolidation range for the summer expected to be around $4,000.

Key market catalyst: Non-farm payroll data drives changes in interest rate expectations

The July non-farm payroll data, to be released next week, is the most important short-term indicator. June's non-farm payrolls increased by only 57,000, significantly below expectations. If this employment data weakens again, the market will quickly revise its expectations for an interest rate hike this year, pushing down US Treasury yields. Once the 2-year yield falls below 4%, gold prices could potentially reach $4,500-$4,750 this year, reopening the space to challenge $5,000; conversely, strong employment data will reinforce hawkish expectations, and gold prices will continue to fluctuate within a range.

Gold's multiple underlying support levels have not weakened.

Despite the pressure from interest rate hike expectations suppressing buying of gold ETFs, other pillars of demand in the gold market remain resilient: 1. Central banks worldwide continue to increase their gold reserves, maintaining the long-term buying trend; 2. Strong physical demand from major Asian countries, with June gold imports reaching a two-year high, provides solid physical support; 3. As long as gold ETFs do not experience significant outflows, maintaining their current size will effectively support gold prices. A deeper macroeconomic backdrop: The US-Iran conflict has boosted fiscal spending in various countries, pushing global debt to a record high of $353 trillion. Overseas investors continue to reduce their holdings of US Treasury bonds, and central banks are turning to gold, further highlighting gold's strategic reserve value. Even if the Federal Reserve maintains a hawkish stance, long-term funds will still allocate gold to hedge against the risks of paper currency debt.

Gold Price Target Outlook

Institutional baseline scenario forecasts: Gold prices will trade between $4,750 and $5,500 per ounce over the next 6 to 9 months, with a potential break above $5,000 in the first half of next year. In the short term, market movements are highly dependent on interest rate expectations; a shift in expectations is a necessary condition for initiating a new upward trend.

Summarize

In the short term, gold prices are constrained by high real interest rates, and are expected to fluctuate around $4,000 during the summer, awaiting guidance from Federal Reserve policy and non-farm payroll data. In the medium to long term, the supporting factors of high global debt, continued central bank gold purchases, and strong physical demand from major Asian countries remain intact. State Street believes the next round of gold's $1,000-level rally will be upward; if weak employment data leads to a cooling of interest rate expectations, gold prices could potentially reach $4,750 this year. Spot gold weekly chart source: FX678. As of 12:10 PM Beijing time on July 28, spot gold was trading at $4046.86 per ounce.