International Gold Struggles Around the 4000 Mark, Institutions Say Continuous Uptrend Is Not Yet Certain

The international spot gold price is struggling to hold above the key $4,000 per ounce threshold. Technical indicators suggest that the sell-off may have been overdone, but BCA Research Chief Commodity Strategist Roukaya Ibrahim believes that a technical rebound does not necessarily indicate the start of a new rally.

In an interview with Kitco News, Ibrahim stated that the gold market is currently caught in a tug-of-war between technical factors and macro fundamentals: technical indicators suggest gold prices may be near a short-term bottom, but the economic environment remains insufficient to support a sustained rise. She expects that gold prices are more likely to consolidate sideways in the near term, rather than see a significant rise driven solely by a technical rebound.

She pointed out that gold's deviation from its 200-day moving average has reached levels last seen in late July. At that time, gold also underwent a significant adjustment, subsequently forming a short-term bottom and rebounding. The current technical status indicates that the recent sell-off may have pushed gold into oversold territory, potentially providing some support in the coming weeks.

However, Ibrahim emphasized that $4,000 per ounce remains an important market dividing line. If gold prices continue to fall below this level, the market could still face further downside pressure. While technical indicators show the sell-off has been extreme, they alone cannot reverse the adverse impact of the macro environment on gold.

Inflation and the Dollar Limit Rebound Potential

The main obstacles confronting gold stem from inflation and U.S. monetary policy. Ongoing Middle East conflicts continue to disrupt the energy market, pushing oil prices higher, thereby heightening concerns about a resurgence of inflation and increasing the likelihood that the Federal Reserve will maintain its tight policy stance.

Ibrahim believes that short-term inflation risks remain skewed to the upside. Rising energy prices could make it harder for the Fed to consider loosening policy, and even though U.S. Treasury yields have come down from recent highs, this may not be enough to trigger a sustained gold rebound.

She also noted that the relationship between gold and the dollar has become more significant in recent months, while the impact of real interest rates on gold prices has relatively weakened. If the dollar remains strong through the end of the year, it will be difficult for gold to gain sufficient upward momentum.

As a non-interest-bearing asset, gold typically reacts to movements in the dollar and changes in rate expectations; when the dollar strengthens and markets expect monetary policy to stay tight, gold's attractiveness may be suppressed.

Therefore, Ibrahim maintains a cautious outlook for gold prices in the short term. She believes technical factors may provide price support, but without a clear improvement in macro conditions, it is unlikely that technical signals alone will prompt a significant rally.

Recent Sell-Off May Not Signal Deteriorating Long-Term Investment Logic

Despite the steep decline in gold prices recently, Ibrahim does not believe this necessarily signals a fundamental shift in gold’s long-term investment thesis. She described last week’s sell-off as a rather abnormal market fluctuation, suggesting that cross-asset liquidity pressures may have been a key factor driving gold lower.

Usually, a weaker dollar or lower U.S. Treasury yields would be supportive for gold, but recent gold declines have occurred even as related markets were positioned to provide such support. Ibrahim believes this divergence may reflect investors selling gold to raise cash or rebalance their portfolios in response to losses in other assets, rather than a sudden deterioration in gold’s fundamentals.

This assessment also implies that gold’s short-term price movement could continue to be influenced by liquidity flows and position changes. Even if long-term investment demand remains stable, tightened liquidity could still weigh on gold prices in the short term.

Central Bank Demand Provides Support; Private Investment May Dictate the Next Rally

Over the longer term, Ibrahim sees investment demand as an important pillar of the gold market. Central banks around the world continue to buy gold, helping to sustain market demand, but since official sector purchases are already at high levels, she does not anticipate a marked acceleration in central bank demand.

However, she believes that if gold is to see a more sustained rise, changes in private investment demand could be more critical.

U.S. fiscal sustainability and government debt issues could act as catalysts for private capital to reallocate into gold. If investors become increasingly concerned about U.S. fiscal deficits and debt burdens, this may prompt greater allocation to gold-backed ETFs and other gold investment products to diversify portfolio risks.

However, this long-term support is not sufficient to offset current macro headwinds. Ibrahim stresses that the gold market remains in a tug-of-war between long-term investment demand and short-term monetary policy and dollar trends. If the dollar weakens in the future and inflationary pressures gradually ease, gold could face a more favorable macro environment as early as 2027.