Gold prices have fallen to around $4,000 an ounce, extending a sharp sell-off that has prompted major banks to rein in once-bullish forecasts as expectations of a swift return to record highs fade.
The reversal follows a historic two-year rally that saw spot gold more than double from around $2,000 an ounce at the start of 2024 to an intraday record near $5,600 in late January.
Spot gold was trading around $4,025 a troy ounce early Friday, leaving the precious metal lower for the year and roughly 30% below its intraday record high.
Gold has come under pressure from a stronger US dollar and growing expectations that the Federal Reserve will keep interest rates higher for longer — or even raise them — reducing the appeal of non-yielding assets such as bullion.
"The sell-off may appear surprising given ongoing geopolitical uncertainty and continued central bank buying. However, gold's weakness highlights the extent to which markets have shifted their focus from safe-haven demand towards the implications of higher interest rates and tighter financial conditions," wrote Ewa Manthey, a commodity strategist at ING, on Thursday.
Higher interest rates typically weigh on gold because the metal pays no income, making bonds and other yield-bearing assets relatively more attractive. A stronger greenback also makes dollar-denominated gold more expensive for global buyers, dampening demand.
The sharp downturn has forced banks to rethink forecasts that only months ago envisioned fresh records driven by geopolitical tensions, central-bank buying, and Fed rate cuts.
ING's Manthey added that higher bond yields, a firmer dollar, and softer investor demand are likely to keep gold under pressure for longer than it had previously expected, prompting the bank to lower its price outlook.
On Thursday, the Dutch bank cut its forecast for gold to average $4,300 an ounce in the third quarter of 2026 and $4,600 in the fourth quarter, down from previous estimates of $4,850 and $5,000, respectively.
Earlier this week, Deutsche Bank also downgraded its outlook, cutting its third-quarter forecast by more than 20% to $4,300 an ounce and lowering its fourth-quarter projection by 17% to $4,800, according to analyst Michael Hsueh.
"The usual suspects which might provide support via investment demand are notably absent, for now," Hsueh wrote, pointing to weaker demand from exchange-traded funds as well as softer buying from China and India.
The downgrade follows a similar move by Goldman Sachs last week. The Wall Street bank lowered its year-end gold target by $500, to $4,900 an ounce, after abandoning its expectation that the Federal Reserve would cut interest rates this year.
Bank of America, which has maintained a 12-month target of $6,000 an ounce since January, recently acknowledged that reaching that level now "looks unlikely for now."
The string of forecast cuts underscores how quickly sentiment has shifted in the gold market.
Just months ago, some analysts were debating whether bullion could climb to $6,000 an ounce, while a viral post argued prices should be priced as high as $12,595. on the back of relentless central-bank buying.
