Gold’s extraordinary rally appears to be running out of steam, with prices hovering in vulnerable territory near $4,000 per ounce as expectations for tighter U.S. monetary policy and a stronger dollar take a toll on the metal’s momentum.
After reaching an all-time high of $5,595 per ounce in January, spot gold has dropped 25%, dragged lower by an oil-price surge tied to the Iran war that fueled bets on interest rate increases. That shift has dulled gold’s traditional appeal as a safe-haven investment and pushed prices to their lowest point in six months on Thursday.
“In the very short term, the market has to digest the risk of a Fed hike and a stronger dollar,” said Aakash Doshi, head of gold and metals strategy at State Street Investment Management.
Doshi believes gold could recover if tensions in the Middle East ease and oil prices fall back to $80 a barrel. Over a longer horizon, he says gold may reclaim its safe-haven status as government fiscal deficits grow and geopolitical fragmentation stemming from the Iran conflict deepens.
As of Friday, gold was trading at $4,188 per troy ounce, after bottoming out at $4,022 on Thursday — its lowest since November.
A strong U.S. jobs report last week intensified rate-hike expectations and pushed gold below its 200-day moving average for the first time in two and a half years. That key technical threshold, now acting as a resistance level at $4,446, signals a shift in market dynamics, according to one precious metals trader. For context, gold surged 64% in 2025 — the biggest annual gain in 46 years.
Gold’s remarkable climb in recent years was fueled by heavy central bank purchases and demand for safe-haven assets, as investors looked to hedge against risks tied to U.S. President Donald Trump’s trade tariffs, concerns over Federal Reserve independence, and Russia’s ongoing war in Ukraine.
“While analysts were fixated on Trump’s new world disorder, it now seems that last year’s huge gains were driven in good part by rate-cut expectations,” said Adrian Ash, head of research at online marketplace BullionVault.
Ash also noted that managed short positions on COMEX gold fell to their lowest level since January 2025 in the week ending June 2, leaving considerable room for bearish bets to accumulate.
Standard Chartered analyst Suki Cooper estimates that at least 270 tons of gold held in exchange-traded funds are currently underwater at prices below $4,250 per ounce. If prices fall to $4,000, that figure would climb to 298 tons. Gold-backed ETFs saw outflows of 16 tons in May and an additional 7 tons in the first week of June.
Physical demand is also providing little support, with the market in its seasonally slow period and gold trading at a steep discount in India.
Nicky Shiels, head of metals strategy at MKS PAMP, expects gold to trade in a relatively narrow range over the coming months “before more strategic tailwinds and catalysts emerge.”
