Gold Price Shows Signs of Bottoming as It Breaks Through the $4,000 Tug-of-War Zone

　　Breakthrough of $4,000 “tug-of-war zone”

　　Gold price shows signs of bottoming out

　　◎Reporter: Zhang Jiao

　　The news that the US has suspended military strikes on Iran has quickly triggered a chain reaction in global markets. On July 27, London spot gold opened higher and continued to climb. As of Shanghai Securities News press time, it had risen above $4,100/oz (UTC+8), up more than 1% intraday. On the same day, WTI crude oil futures and Brent crude oil futures saw their intraday losses expand to as much as 8%.

　　Since June, gold has continued to bottom out, and after a struggle near $4,000/oz in recent sessions, it finally achieved a breakthrough. Experts interviewed believe that the US-Iran situation remains the core driver of gold prices in the short term, and we are currently in a stage where gold is building a base and the market has become sensitive to bullish signals. At the same time, the momentum for “rate hike trades” is approaching its limit, and oil prices have shifted from being a suppressive variable to just one of many factors.

　　Gold price builds base, awaiting Fed signals

　　“The rebound in gold price on July 27 was a result of easing geopolitical risks,” said Liu Yu, chief economist of Industrial Securities. In the short term, the situation between the US and Iran remains the greatest uncertainty in the gold market. The current period is one in which gold is bottoming out, and the market has become sensitive to positive signals.

　　Tony Pasquariello, head of Goldman Sachs hedge fund coverage, believes that speculative long positions in gold have already been cleared out. Combined with renewed central bank gold buying and repeated support for gold prices near $4,000/oz, now is a good time to establish structural long positions in gold.

　　Positive signals on the flow of funds confirm buying interest is increasing. As of July 24 (last Friday), the world's largest gold ETF, the SPDR Gold Trust, held 1,009.29 tons of gold, up 10.28 tons for the week.

　　However, Fu Xiaoyun, chief commodities researcher at Industrial Research, argues that long-term allocation demand, such as from central banks, supports the gold price fluctuating around $4,000/oz in the short term, but the Fed still poses a risk of tightening. This makes the probability of a significant gold price rebound still low, and patience is needed as gold looks for a floor.

　　In fact, the main narrative in the financial markets has recently revolved around the tug-of-war between geopolitical risks and macro policy expectations. Whether the short-term rebound in gold prices can continue depends on the clarity of the Fed’s policy path.

　　The market is focused on the Fed's interest rate decision to be released in the early hours (UTC+8) of July 30, but the general expectation is that the federal funds rate will be maintained. Investors are closely watching to see whether the Fed's statement will hint at a possible 25 basis point rate hike in September.

　　James Knightley, analyst at ING, wrote in the report that Fed Chair Waller has consistently avoided forward guidance and prefers short policy statements, so investors may find it hard to get clear signals. Coupled with the recent underperformance of US CPI, PPI, and employment data, the motivation to send a hawkish signal in this meeting is limited.

　　Liu Yu stated: if the meeting statement and Waller's comments are not more hawkish than expected, it may push the gold price’s trading center higher; if they are more hawkish than expected, there is a risk of a short-term pullback.

　　“Rate hike trades” approaching their limit in the short term

　　Whether gold prices have really reached a turning point also depends on the evolution of their pricing logic. From the second half of 2025 through early 2026, expectations for “de-dollarization,” renewed central bank gold buying, and the resonance of risk-aversion sentiment could accelerate gold’s move toward its peak.

　　Liu Yu noted in his report that from late February to June this year, the US-Iran conflict pushed up oil prices. Coupled with the resilience shown in the US economic data, the market shifted toward a “rate hike trade” narrative, real interest rates continued to rise, and gold prices retraced. Meanwhile, the rapid withdrawal of trading funds amplified short-term volatility.

　　“At present, the short-term ‘rate hike trade’ is reaching its limit, and gold prices have the basis for a rebound.” According to Liu Yu, as the geopolitical contest enters a period of volatility, oil prices have lost their one-sided upward momentum, significantly easing so-called “second-round inflation” pressures and reducing the risk of gold’s one-sided decline.

　　The Fed's tightening pricing is also facing a “ceiling,” and the upside for “rate hike trades” is limited. Liu Yu points out that the market has already priced in about 30 basis points of rate hike expectations, with only about 20 basis points of room left for speculation. Furthermore, the intensification of the K-shaped economic divergence means the window for rate cut bets may reopen in the second half of the year.

　　Song Xuetao, chief economist at GF Securities, also believes that the recent rise in oil prices seems to have had a weaker impact on rate hike expectations. From June 30 to July 23, Brent crude rebounded 32% from its lows, only nudging expectations for the number of rate hikes from 1.1 to 1.3. Rate hike expectations now focus more on reflecting medium- to long-term inflation expectations. “The most ‘hawkish’ phase may have passed, which has helped catalyze the rebound in gold, silver, and nonferrous metals to a certain extent,” said Song Xuetao.

　　This is reflected in gold trading, where the “gold-oil seesaw” effect has temporarily failed. According to Liu Yu, during the two trading days of last week, the fact that gold and oil both rose indicates a marginal change in the pricing logic—gold has become clearly less sensitive to negative signals and more desensitized to real interest rates.

　　However, on the 27th, the market returned to the “declining oil price, rising gold price” mode. Liu Yu believes that, for now, there is no need to obsess over oil prices, as the important change in market pricing is that oil is now just one of several variables, no longer a suppressive one.

　　Oscillatory recovery may unfold

　　What will be the anchor for gold pricing in the next stage? Liu Yu believes the key to breaking the current deadlock is whether Waller will release clear dovish signals in the future, thereby guiding the market to reprice rate cut expectations.

　　Research by Industrial Securities shows that in all historical gold drawdowns greater than 20%, the main driver has always been a restart of monetary easing and real interest rates turning negative, accelerated by factors such as central bank gold buying.

　　Zhao Wei, chief economist at Shenwan Hongyuan Securities, and his team noted in their report: if global funds continue to gather in US dollar assets, gold will lack marginal allocation advantages in a market driven by liquidity. Central bank gold buying is a “slow variable,” so there is no need to focus on the short-term actions of individual economies. On an aggregate basis, central bank gold purchases are still ongoing, which may continue to lift the center of gravity for gold in the future.

　　What the gold market really needs now is a “fast variable”—stronger investment demand. UBS estimates that it takes about 500 tons of investment demand per quarter to push gold prices higher. To accelerate investment demand, the US growth narrative needs to support a more accommodative monetary policy backdrop or shift toward a challenging growth and inflation mix, such as stagflation.

　　Song Xuetao said that gold has allocation value on the downside in the second half of the year but needs catalyst events to drive it higher, with a year-end target of $4,300 to $4,500 (UTC+8). The more likely path ahead is oscillatory recovery, and a new round of unilateral upward movement will require more catalysts. “The main macro trading narrative will still revolve around Fed policy. The fourth quarter could be a window for gold to resume its rally,” Liu Yu said.

Editor: Zhu Henan