Gold analysis — 2026-06-25

Gold fell below $4,000/oz on June 25 for the first time since November 2025, as a hawkish Federal Reserve under Chair Kevin Warsh combined with a dollar at its highest level in more than a year to overwhelm the metal's traditional safe-haven appeal. Despite central banks purchasing 244 tonnes in Q1 2026 — the 17th consecutive quarter of net accumulation — gold has now surrendered 29% from its January all-time high of $5,589/oz as rate hike expectations reassert dominance over geopolitical risk premia. Goldman Sachs cut its year-end target by $500 to $4,900 on June 20, citing fading ETF inflows and the removal of all 2026 rate cuts from its forecast.

TL;DR

• Gold fell to $3,998/oz on June 25 — lowest since November 2025, down 29% from January all-time high of $5,589
• Goldman Sachs cut year-end target to $4,900 on June 20 (-$500); J.P. Morgan now targets $5,000 for Q4 2026
• Markets price 68% probability of Fed rate hike in September under Chair Kevin Warsh — primary near-term headwind
• Central banks purchased 244 tonnes in Q1 2026 — 17th consecutive quarter of net accumulation, PBoC added 7t in March
• Dollar at 13-month high making gold costlier for non-dollar holders; DXY break above 108 would intensify pressure

Market Overview: Supply, Demand and Key Participants

Supply Dynamics

Gold supply increased 2% year-on-year in Q1 2026 to 1,231 tonnes, driven by modest mine production growth and a 5% uptick in recycling. Q1 mine production reached nearly 2% above the previous first-quarter record of 871t set in Q1 2023.

Mine supply faces structural headwinds including declining ore grades, rising costs, permitting delays, ESG pressures, and capital discipline among major producers. Recycling reached 366 tonnes in Q1 2026 (+5% y/y), with supply highly price-elastic as elevated prices boost scrap flows.

Top Producers: China, Australia, United States, South Africa, Russia, Peru, and Indonesia are among the largest gold producers globally. China maintained its position as the world's largest producer with approximately 380 tonnes in 2024, representing roughly 10% of global mine production.

Demand Structure

Q1 2026 gold demand value reached a record $193 billion on a 74% year-on-year price increase while volume grew only 2% to 1,231 tonnes, demonstrating price-insensitive institutional demand.

Demand Breakdown:

• Jewelry (~45–50% of identifiable demand historically): culturally dominant in India, China, Turkey, and Middle East
• Bar and coin demand reached 474 tonnes, the second-highest quarterly total on record
• Central bank net purchases of 244t in Q1 exceeded both previous quarter and five-year average
• ETF buying slowed in Q1 but remained positive after record 2025 inflows

Key Consumers: India, China, United States, Turkey, Saudi Arabia, Russia, and United Arab Emirates are the largest gold jewelry consumers. India is the world's largest gold consumer/jewelry market with low domestic production, requiring hundreds of tonnes annually for jewelry, investment, and central bank buying.

Price Drivers: Current Market Forces

Federal Reserve Policy and Real Yields

The Fed kept interest rates unchanged but signaled increasing support for tighter monetary policy, with Chair Kevin Warsh indicating commitment to bringing inflation under control. Markets currently assign roughly 68% probability of a Fed rate hike in September, up from 29% a week ago.

Gold weakened below $4,000/oz as a stronger dollar and growing expectations of Fed rate hikes continued to weigh on prices, with the dollar rising to its highest level in more than a year making dollar-denominated commodities costlier.

Central Bank Demand

Central bank gold demand began 2026 strongly with estimated net purchases of 244t in Q1, exceeding both the previous quarter and five-year average, underscoring continued commitment to strengthening reserves.

The People's Bank of China made its seventeenth consecutive monthly gold purchase in March 2026, adding 7 tonnes to reach 2,313 tonnes (9% of total reserves). Poland is leading global gold accumulation in 2026, adding over 20 tonnes as part of a broader multi-year plan to reach 700 tonnes.

However, Q1 saw 115t of gold sales reported by central banks, with Turkey selling around 70t (approximately 10% of official holdings), reflecting tactical liquidity management amid elevated prices.

Geopolitical Risk Premium

Progress in US-Iran peace negotiations has driven oil prices back to pre-conflict levels and significantly reduced inflationary pressures, paradoxically reducing gold's geopolitical bid.

"Geopolitics remain front and center in our outlook for gold demand in 2026. Our view remains that investment and central bank demand will be supported by ongoing geopolitical risk", according to the World Gold Council.

Price Momentum Factors

Bullion is now down about 5% year-to-date and 29% below its January record high of $5,589 reached before the outbreak of conflict involving Iran. Gold futures have been in controlled descent since topping near $5,650, with sellers methodically stepping down offers.

Geopolitical Factors: Political and Regulatory Developments

De-Dollarization and Reserve Diversification

The freezing of roughly $300 billion in Russian central bank assets in 2022 marked a turning point for global reserve management, since which countries like China and several Central Asian economies have accelerated diversification into gold.

Gold now accounts for a larger share of central bank reserves than U.S. Treasuries for the first time since 1996, representing a historic turning point in global monetary architecture.

Middle East Conflict Dynamics

Hormuz-linked oil inflation held US Consumer Price Index growth at 3.3% year-on-year in March 2026, keeping the Federal Reserve on hold. "These themes are on hold until more clarity arrives around a resolution of the Iran conflict, which removes some of the tail risks for energy prices, inflation and yields", according to J.P. Morgan analysis.

Global geopolitical tensions, particularly ongoing conflict in the Middle East, are expected to remain dominant drivers of gold demand through 2026 and beyond.

Regulatory and Policy Environment

The geopolitical risk premium that has helped lift gold over past few years is set to continue and perhaps expand with uncertainty about the new Federal Reserve chair, timing of confirmation, and strained US-China relations.

China's recent VAT policy change remains an obstacle for jewellery demand in that market, likely funneling further purchases towards lower-premium bars and coins, demonstrating how tax policy can reshape demand patterns.

Emerging Market Implications

EM Central Bank Accumulation

Sustained central bank demand, particularly from emerging markets, with Goldman projecting these institutions will collectively purchase approximately 60 tonnes of gold per month throughout 2026. Total emerging market central bank purchases could approach 850 tonnes for the year.

The freezing of Russian assets marked a turning point, prompting countries like China and Central Asian economies to accelerate gold purchases, treating bullion as a reserve asset that sits outside the reach of foreign governments.

Asian Physical Demand

India's gold demand rose 10% y/y to 151t in Q1 while nearly doubling in value to record INR 2,275bn ($25bn), with growth led by investment demand up 54% y/y to 82t. Broad Asian investment demand, particularly in China, continues to benefit from rising safe-haven demand.

Outlook: 6-12 Month Scenarios and Projections

Institutional Price Targets

Goldman Sachs cut its year-end 2026 target from $5,400 to $4,900 on June 20, 2026, citing fading ETF inflows and the removal of all 2026 rate cuts from its forecast. J.P. Morgan recently lowered its forecast, now targeting $5,000/oz in Q4 2026. Major bank consensus:

Gold is currently trading at $3,998 — approximately 29% below its January 2026 all-time high of $5,589 — meaning every major bank forecast implies significant upside from current levels.

Scenario Framework

Base Case (Rangebound — 50% probability): Mild economic cooling and falling interest rates: +5% to +15% increase in gold price. Base case that gold regains momentum and tests $4,900–$5,000 range later in year.

Bull Case (Economic stress — 30% probability): Gold rally toward $5,500–$6,000 in upside scenario where central bank and China's retail demand remain steady and ETF flows projected at 75-100% the pace of 2025.

Bear Case (Reflation — 20% probability): Fed hiking cycle solidifies, USD rallies, gold slides toward $4,400 by year-end. Goldman's explicit bear case if September rate hike materialises.

Monitoring Points: Critical Indicators to Track

1. Federal Reserve Rate Path and Real Yields

Track CME FedWatch probabilities for September 2026 meeting and 10-year TIPS yields. Current 68% probability of September hike represents primary near-term headwind.

Key Threshold: Break above 10-year real yields of 2.5% would intensify pressure; reversal below 1.5% would support $5,000+ retest.

2. Central Bank Purchasing Activity

Monitor World Gold Council monthly central bank statistics. Full-year target remains 700-900t; sustained quarterly pace below 175t would signal structural demand shift.

3. Dollar Index (DXY) Momentum

Dollar at highest level in more than a year against basket of major currencies. DXY strength represents most reliable short-term headwind.

Key Threshold: DXY sustained break above 108 intensifies pressure; break below 102 would likely trigger $4,800+ recovery.

4. Asian Physical Demand Premium

Track Shanghai Gold Exchange premium to London spot and Indian import duties/volumes. India's Q1 demand rose 10% y/y despite high prices demonstrates demand resilience.

Key Threshold: Shanghai premium narrowing below 0.5% or Indian monthly imports falling below 50 tonnes would signal demand destruction.

5. ETF Flow Momentum

Monitor weekly global gold ETF holdings. Since beginning of 2025, gold-backed ETFs added approximately 500 tonnes.

Key Threshold: Three consecutive months of North American ETF outflows exceeding 30 tonnes would signal weakening investor conviction.

Key Data Points

FAQ

Q: Why has gold fallen despite elevated geopolitical risk from Middle East conflict? A: Despite heightened geopolitical uncertainty, gold has struggled to retain traditional safe-haven appeal during war, with the surge in oil prices fueling inflation concerns that prompted major central banks to adopt a more restrictive monetary policy stance, increasing the opportunity cost of holding non-yielding assets. The dollar's simultaneous strength as a safe-haven currency has offset gold's traditional bid, and the recent US-Iran peace progress has further reduced the geopolitical premium that had supported prices earlier in 2026.

Q: Are central banks still net buyers or has the trend reversed? A: Central bank demand began 2026 strongly with estimated net purchases of 244t in Q1 exceeding both the previous quarter and five-year average, though 115t of sales were reported including Turkey's significant liquidation of around 70t. The trend remains structurally positive — the PBoC made its 17th consecutive monthly purchase in March, and approximately 45% of central banks surveyed by the World Gold Council plan to grow their reserves in the coming year. Goldman projects 60 tonnes of monthly official sector purchases throughout 2026.

Q: What would need to happen for gold to retest $5,000+ levels by year-end? A: Three catalysts would likely be required: (1) Fed pivot away from hiking bias — markets currently price 68% probability of a September hike which is the primary headwind; (2) dollar reversal from its 13-month high — DXY breaking below 102 would likely trigger significant relief; and (3) resumption of ETF inflows following May's $2 billion outflow including the first Asian ETF outflow since August 2025. Goldman's base case at $4,900 and J.P. Morgan's at $5,000 both imply meaningful recovery from current $3,998 levels, but require at least a pause in the Fed's hawkish rhetoric.