Gold prices are expected to remain near $4,000 per ounce for the rest of the summer as markets wait for clearer guidance from the Federal Reserve on the direction of monetary policy.

Although gold has struggled to hold above $4,100 per ounce, it continues to find solid support near $4,000 while the 10-year real yield trades around 2.4%, close to its highest level since October 2023.

Monetary Tightening Expectations May Have Gone Too Far

Aakash Doshi, Head of Gold Strategy at State Street Asset Management, believes markets may be overestimating the likelihood of further interest-rate increases from the Fed.

According to Doshi, financial conditions have already tightened significantly as real yields have risen. This could allow the Fed to leave interest rates unchanged for the rest of the year.

In the near term, gold may continue consolidating until markets gain greater clarity on the outlook for U.S. monetary policy.

Gold Targeted at $4,750 to $5,500 Within Six to Nine Months

Doshi maintained his base-case forecast that gold could trade between $4,750 and $5,500 per ounce over the next six to nine months.

Should rate expectations shift and the two-year U.S. Treasury yield fall below 4%, gold could reach $4,500 to $4,750 per ounce before the end of the year. That would bring the $5,000-per-ounce level back into focus for the first half of next year.

Labor-Market Data Could Be the Next Catalyst

The July nonfarm payrolls report could become an important catalyst for gold’s next move.

The June report showed that only 57,000 jobs were created, significantly below expectations. If the next report also disappoints, markets may quickly reduce expectations for further rate increases, potentially providing fresh momentum for gold.

Long-Term Fundamentals Remain Strong

Beyond monetary policy, gold continues to benefit from several supportive long-term trends:

• Central-bank gold demand remains steady

• China’s gold imports reached a two-year high in June

• Even stable demand for gold-backed ETFs could have a meaningful effect on prices

• Global debt has climbed to a record $353 trillion

• Foreign ownership of U.S. Treasuries continues to decline while central banks increase their gold reserves

These developments reinforce gold’s role as a strategic monetary asset and a tool for diversification away from traditional reserve assets.

Conclusion

In the near term, gold may continue trading around $4,000 per ounce while markets await clearer signals from the Fed and upcoming U.S. economic data.

However, if Treasury yields decline and interest-rate expectations shift, gold could enter a new upward phase toward $4,750 to $5,500 per ounce, with $5,000 emerging as a key target for the first half of next year.

Source: Reuters