Gold Correction: Analysts Lower Forecast to $4,900 Amid Fed's Hawkish Stance
The precious metals market has received a serious signal for a correction. Leading analysts have revised their annual gold forecast downward by $500, to $4,900 per troy ounce. The main reason for this move is a drastic change in expectations regarding the monetary policy of the U.S. Federal Reserve (Fed).
Pressure from Monetary Policy
The key factor influencing the forecast revision was a sharp decline in market confidence in interest rate cuts in 2026. Previously, investors had priced in at least two rounds of policy easing, but now those hopes have virtually evaporated. The Fed left rates unchanged this week in the range of 3.50–3.75%, and more importantly, the number of "hawks" among committee members advocating for a hike is growing. Nine representatives of the regulator now expect at least one rate increase this year.
This stance makes gold less attractive as a safe-haven asset. In a high borrowing cost environment, the opportunity cost of holding the metal, which generates no interest income, increases. If the Fed does proceed with a hike, for example as early as September, as some experts suggest, gold prices could fall to $4,400 by the end of the year.
Outflows from ETFs and Bearish Sentiment
The second alarming signal is a sharp cooling of interest in gold-backed exchange-traded funds (ETFs). In May, investors withdrew about $2 billion from such funds worldwide. Notably, the only region showing inflows was Europe. Asian funds, on the other hand, lost $1.2 billion, marking the first net outflow since August 2025. This indicates that even traditional buyers from Asia have temporarily lost interest in the metal.
At the same time, the market is seeing a strengthening of bearish sentiment. Investors are increasingly hedging risks, expecting further declines. Nevertheless, fundamental support factors should not be dismissed.
Central Banks as Market Support
The main stabilizing factor remains the activity of central banks. In April, they continued to increase their gold reserves, buying 19 tons more than they sold. According to a survey by the World Gold Council, about 45% of central banks plan to increase their holdings over the year. This institutional demand creates a solid "floor" for prices and prevents the metal from falling too sharply.
Cryptalist Commentary: The gold market is going through a phase of reassessment. The Fed's hawkish rhetoric is a temporary but powerful driver for profit-taking. However, structural demand from central banks and geopolitical instability have not disappeared. For long-term investors, the current correction is more of an entry opportunity than a reason to panic. In the short term, however, one should expect increased volatility in the range of $4,700–$5,000.