- After spot gold prices hit a new low for the year at $3,946.65 on Tuesday, they rebounded to $4,026.17. However, gold has still recorded a significant decline of 11.2% so far in June, potentially marking the worst quarterly performance since the second quarter of 2013.
- According to the CME FedWatch Tool, traders' expectations for the Federal Reserve to raise interest rates three times this year have solidified, with the probability of a rate hike at the September meeting remaining high at 64%.
- OCBC Bank has officially lowered its forecast for the nominal gold price by the end of 2026 from $5,100 to $4,360. Meanwhile, Maybank analysts suggest that gold prices need to fall to $3,600 to trigger substantial incremental buying.
Repricing of Real Yields Severely Impacts Non-Yielding Safe-Haven Assets
Following a massive retreat of geopolitical premiums, the global gold market is undergoing a new round of significant valuation corrections driven by macro liquidity tightening. As Middle Eastern geopolitical uncertainties gradually give way to strong expectations of aggressive rate hikes by the Federal Reserve to curb high inflation, spot gold has repeatedly fallen below the $4,000 mark, showing clear signs of a breakdown. Marex precious metals strategist Edward Meir points out that the current global asset allocation is in an extreme macro environment characterized by high inflation, high interest rate expectations, and a strong dollar. This combination has exerted defensive pressure on non-yielding assets, completely overwhelming all traditional bullish factors that have supported gold prices in recent quarters.
Restoration of Policy Credibility Strengthens Devaluation Trade Logic
The deep-seated reason for the systemic withdrawal of funds from precious metal asset allocations in this round lies in the Federal Reserve's hawkish repricing of the forward interest rate path following its latest policy meeting. The determination shown by Federal Reserve Chairman Kevin Walsh to restore policy credibility has objectively led to a large-scale unwinding of currency devaluation trades that had previously deeply undermined the dollar's purchasing power. Wall Street's multi-strategy team analysis indicates that Walsh's successful reconstruction of the Fed's hardline policy boundaries against structural inflation has the potential to record a second consecutive month of gains in the nominal dollar index, making dollar-denominated precious metals significantly more expensive for holders of non-U.S. currencies.
Non-Farm Employment Indicators Outlook and Primary Market Consolidation
As gold prices engage in high-frequency tug-of-war near the $4,000 threshold, fixed income and commodity traders are turning their full attention to the upcoming release of June's ADP employment data and the non-farm payroll report, aiming to precisely gauge the Federal Reserve's subsequent policy path. Mitsubishi UFJ Financial Group's latest strategy report emphasizes that in the short term, the significant decline in international oil prices has alleviated some inflationary pressures, coupled with the dollar index maintaining strong resilience. The underlying logic of higher rates for longer is continuously weakening the market's bottom allocation demand for physical safe-haven assets. If this week's non-farm wage growth shows unexpected resilience, the downward trajectory of spot gold prices may find it difficult to achieve a substantial reversal in the short term.
