International spot gold prices experienced a sharp pullback on Tuesday after briefly surpassing the $4,400 per ounce mark, reaching a two-month high. Market attention is now shifting to the upcoming U.S. inflation data, which will be key to determining the Federal Reserve's future interest rate path.
Spot gold touched an intraday high of $4,435.13 per ounce during the session, the highest level since June 5, before retreating. As of press time, the precious metal was trading approximately 0.4% lower, around the $4,370 per ounce level.
The recent ascent in gold prices has been primarily driven by technical buying. As the metal broke above its 100-day moving average, bullish sentiment in the market intensified, coupled with increased inflows into Chinese gold ETFs, prompting investors to reposition themselves in the precious metals sector. However, the market is now in a wait-and-see mode ahead of the U.S. July Consumer Price Index (CPI) data.
Following the release of weaker-than-expected employment data, if inflation continues to cool, it could alleviate the Fed's concerns about price pressures and reduce expectations for further interest rate hikes, which would be positive for gold. On the other hand, rising energy prices could reignite inflation risks. U.S. President Donald Trump's recent hardening of his stance on Iran has cast a shadow over the prospects for reopening the Strait of Hormuz, and higher oil prices could increase pressure on the Fed to maintain its tightened monetary policy stance. Since gold does not generate interest, higher interest rates typically diminish its appeal.
There is currently a clear divergence of opinions within the Federal Reserve regarding future policy. Cleveland Fed President Loretta Mester indicated on Monday that multiple interest rate hikes may still be necessary to achieve the central bank's 2% inflation target. Ole Hansen, Head of Commodity Strategy at Saxo Bank, said that the key to sustaining gold's recent rally lies in its ability to hold the $4,360 to $4,370 zone. If the price breaks below this level, the market could enter a consolidation phase, potentially suppressed by rising oil prices, a stronger U.S. dollar, and higher bond yields. He noted that long-term investors may need to wait for the price to break back above its 200-day moving average before increasing their allocations.
Over the past few weeks, gold has reclaimed the critical $4,000 support level, driven by factors including continued central bank purchasing, a resurgence in investor safe-haven demand, and concerns about global fiscal risks. Despite the recent significant rebound, gold prices remain about 17% below the levels seen before the outbreak of the Iran war in late February. Meanwhile, rising oil prices and a strengthening U.S. dollar have also limited the upside for the precious metal. Fawad Razaqzada, a market analyst at Forex.com, said that if economic data continues to show a cooling U.S. economy without a significant rebound in inflation, the market may further reduce its expectations for tightening policies, which would weaken the U.S. dollar and provide support for gold.
Long-term Bull Market Foundation Remains: Debt, Central Bank Buying, and Geopolitical Risks Underpin Gold
Maria Smirnova, Senior Portfolio Manager and Chief Investment Officer at Sprott Asset Management, believes that the price correction in gold this year is not a trend reversal but a normal pullback within a long-term bullish cycle. She stated that gold's previous decline from its highs was primarily influenced by short-term liquidity tightening, a stronger U.S. dollar, and investor de-risking. However, the fundamental factors supporting gold's long-term appreciation remain unchanged, including global debt growth, expanding fiscal deficits, central bank de-dollarization, and geopolitical fragmentation.
She pointed out that in 2025, gold prices surged over 64%, while silver approached 148%, driven by record central bank gold purchases, inflation concerns, and safe-haven demand. Entering 2026, gold hit historic highs before adjusting due to changes in market liquidity, but central bank buying provided significant support to the market. "This correction reflects more cyclical factors rather than a deterioration in fundamentals," said Smirnova. As central banks continue to increase their gold reserves, the strategic value of gold as a non-dollar reserve asset is rising.
Silver, Driven by Industrial Demand, Has a Similarly Strong Long-Term Outlook
Compared to gold, silver has experienced greater volatility this year. Due to its dual financial and industrial attributes, silver is more sensitive to changes in the economic cycle. Smirnova noted that silver demand is being propelled by developments in solar energy, electrification, artificial intelligence infrastructure, and advanced electronic devices, while inadequate growth in mine supply has led to continuous supply deficits in the market for several years. She believes that the rebound in silver prices above $60 indicates that investors are refocusing on the metal's long-term supply-demand imbalance.
Looking ahead, Sprott believes that as the pressures from high interest rates, tightened liquidity, and a strong U.S. dollar are gradually absorbed by the market, precious metals still possess long-term investment value. Smirnova stated that investors need to distinguish between short-term volatility and long-term trends. Expanding sovereign debt, persistent fiscal deficits, the diversification of central bank reserves, and changes in the global geopolitical landscape will continue to strengthen gold's strategic asset status. Meanwhile, silver will gain additional support from the wave of new energy, AI, and industrial upgrades.
Comments