The global gold market is approaching a critical juncture in the second half of the year, according to the World Gold Council's latest mid-year outlook. Following significant volatility since the start of the year, gold's performance will be shaped by a confluence of uncertainties, including geopolitical developments, the interest rate environment, and investor sentiment.
After reaching a record high of $5,405 per ounce in late January, the gold price experienced a substantial correction, falling to a low of $4,002 per ounce by June. This fluctuation has resulted in a 7% year-to-date decline and a rise in average volatility to 30%. Despite this pullback, gold remains one of the top-performing assets over the past 12 months.
The Council's short-term Gold Return Attribution Model indicates that geopolitical risk escalation, particularly tensions between the US and Iran, was the dominant driver of gold's performance in the first half. Additional momentum from investor positioning adjustments and profit-taking also played significant roles. The impact of opportunity cost on gold has been mixed, as markets have reassessed expectations for interest rates and the US dollar. Notably, the majority of price movements occurred during Asian and US trading hours, underscoring the growing influence of Asian investors in global gold price discovery.
Looking Ahead to the Second Half of the Year
The Council's valuation framework suggests gold will continue to act as a barometer for the global macroeconomy. Unlike assets primarily driven by domestic factors, gold reflects the collective demand of consumers, investors, and institutions worldwide.
The report outlines three primary scenarios for the remainder of the year. From current levels, the gold price is broadly aligned with market consensus, which anticipates at least one rate hike from the US Federal Reserve in 2026, likely in October, alongside policy tightening from the Bank of England, Bank of Japan, and European Central Bank. With US inflation expected to peak near 3.9% in the second quarter, gold could trade around $4,100 per ounce with a potential range of ±5%, barring any major shifts in this environment.
A scenario involving a deterioration in the geopolitical or economic landscape, or a shift in interest rate expectations, could see gold regain upward momentum. However, a sustained rally would likely require clear signals of a global economic slowdown.
On the downside, key headwinds include a stronger US dollar, more aggressive-than-expected rate hikes, and a recovery in broader market risk appetite. A sustained break below $4,000 per ounce could trigger further selling pressure. Historically, however, a decline of more than 10% from current levels has often prompted "buy-the-dip" demand from long-term investors across various regions.
Juan Carlos Artigas, Head of Global Research at the World Gold Council, commented, "The gold market this year has sent a clear message: gold is a truly global asset. Its price reflects global macroeconomic and geopolitical dynamics, not just those in the US, which is one reason it offers investors a valuable perspective. While interest rates are important and we expect them to be a key variable in the second half, gold's performance is not driven by a single factor. The price has faced pressure around $4,000 this year but has also found support for rebounds, largely underpinned by intrinsic demand from long-term investors across multiple regions. This structural demand from global central banks, institutional investors, and consumers forms the foundation of gold's resilience."
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