Is the gold hit by the hawkish expectations of the Federal Reserve a "gold pit"? The most brutal retreat since 2008 is not the end of the bull market. The $3900 "bottoming moment" is brewing a new round of rise.

Since the end of February, the continuous weakness in the prices of spot gold and futures has led to a drop of over 1% on Tuesday. Especially, the spot gold price that the market is focusing on is expected to record the largest monthly drop since October 2008. This is mainly due to the shift of risk aversion demand from geopolitical uncertainties in the Middle East and fiscal deficit pressures in Western countries to the market's hawkish monetary tightening expectations of the Federal Reserve to curb increasingly high inflation. However, according to international financial giants such as Goldman Sachs, Barclays Bank, and Deutsche Bank, the recent sharp drop in gold prices seems more like a stark correction within a long-term bull market trajectory, rather than a signal of the end of the long-term gold bull market. They emphasize that the price of gold, hovering around $3900 to $4000, is very close to the bottom of this correction cycle. As of 04:20 Greenwich Mean Time, the trading price of spot gold fell by 1% to $3,975.04 per ounce. The monthly trend so far this month has dropped significantly by 12.4%, and is highly likely to record four consecutive months of decline. The price of the August delivery contract for gold futures on the U.S. Futures Exchange fell by 1.2% to $3,988.60. As shown in the chart above, gold is expected to record the most severe monthly decline since 2008. The global financial markets continue to aggressively price in the Federal Reserve's expectation of at least two rate hikes this year, with the first expected to come in September. Investors are now eagerly awaiting the latest U.S. monthly non-farm employment report for any new clues on the Fed's monetary policy outlook. Meanwhile, the U.S. and Iran plan to resume peace talks in Doha, Qatar later today, although the prospect of a lasting ceasefire remains uncertain. A major sticking point remains with the Strait of Hormuz after Tehran reiterated its plans to monitor traffic through the key passage, even as Oman decides not to participate. The hawkish Fed expectations have overshadowed the narrative of safe haven, as gold heads towards its worst monthly decline since October 2008 On the trading front, the price of gold bars is poised to record its first quarterly decline since 2024, and possibly the largest quarterly decline since June 2013, mainly due to the significant increase in energy prices since the end of February due to the Iran-Middle East war, sparking inflation concerns and fueling market bets on the Fed's rate hike expectations. Edward Meir, a senior analyst at Marex, said: "You are now facing high inflation, high government bond yields/benchmark rate expectations, and a strong dollar, all of which are weighing down on all other bullish factors associated with gold, traditionally deemed to hedge against inflation." As shown in the chart above, gold is likely to record its largest quarterly decline since 2013. Although gold is traditionally seen as a key investment tool for hedging against inflation, its attractiveness plunges significantly in a high interest rate environment. According to the latest compilation of the CME FedWatch, rate futures traders widely expect the Fed to hike rates two to three times this year, with the current pricing showing a 64% probability of a rate hike in September. Investors are currently eagerly awaiting this week's release of the June ADP employment data and non-farm employment data to further assess the Fed's stance on rate hikes or broader monetary policy issues. Since Powell took over the helm at the Fed, the dollar has continued to strengthen, poised for a second consecutive month of gains, making gold priced in dollars even more expensive for holders of other currencies. Oil prices are poised to record their most drastic quarterly benchmark decline since 2020, and investors are still very focused on the outcome of talks between Iran and the U.S. in Doha this week, even though Iran has stated that no meeting has been scheduled. Christopher Wong, senior precious metals strategist at OCBC, said in a report: "For gold bulls to regain trading advantage, at least one of three factors needs to improve: a decrease in real yields, a weakening dollar, or a more distinct retreat in hawkish Fed expectations. Without these, any rebound is likely to be met with sell-offs from global institutional funds at high levels, and gold may spend more time consolidating below previous highs." In other important precious metal price news, spot silver fell by 1.6% to $57.35 per ounce; platinum fell by 0.5% to $1,566.90; palladium rose by 0.5% to $1,219.55. These three metals are all poised to record quarterly and monthly declines. Platinum prices are set to record their most severe monthly decline since 2008 and their most severe quarterly decline since January 2020. Gold suffers its most severe monthly decline since 2008, but the anchor of the long-term precious metals bull market remains unchanged According to major Wall Street financial giants such as Goldman Sachs, the recent sharp drop in gold prices seems more like a bear market-style sharp correction within a bull market, rather than the official end of the long-term gold bull market trajectory. The core pressure behind the significant pullback in spot gold prices stems from the combination of a hawkish narrative of "high inflation - rising rate expectations - a strong dollar - rising real rates", with the CME pricing showing market expectations of three rate hikes by the Fed this year and a probability of a September rate hike as high as 64%. These explanations clarify why gold's safe haven properties have temporarily lost their effectiveness: in a scenario where energy shocks lead to inflation increases, and the Fed is forced to become more hawkish, gold, as a zero-yield asset, will be suppressed by rising real rates and a strong dollar. However, from the consensus expectations of global banks, the bottom is indeed gradually approaching, but the trigger conditions for an immediate massive rebound are clearly lacking. Goldman Sachs has lowered its year-end gold target from $5400 to $4900, as it no longer anticipates a rate cut by the Fed in 2026. It still emphasizes that global central bank gold purchases of around 51 tons per month, three times the level before 2022, continue to be the most robust support logic for the long-term gold bull market. The latest assessment from Bart Melek, senior strategist at TD Securities, provides a more trade-focused perspective: gold prices may first break below $3900 per ounce, completing a phase of bear market-style correction, and then rebound to over $5300 in 2027; the logic behind this is that short-term oil prices and inflation pressures are suppressing gold, but once the inflation pressure eases after the Iran war, rates go down, and the dollar weakens, the "currency debasement trade" and the incredibly strong buying force led by central banks will once again dominate the gold trading sentiment. The European asset management giant Barclays Bank maintains bullish price targets of $4791 in 2026 and $4900 in 2027, and believes that the current fair market value near $4150 has improved the risk-return ratio for investors to re-enter the market. Barclays points out that the current gold correction is not surprising, given the previously over-extended technical outlook and the significant overvaluation of macro factors, especially real rates. From a more macro structural perspective, Barclays Bank believes that the multiple long-term bullish factors for gold remain intact: firstly, the ongoing de-dollarization trend is gradually eroding demand for dollar reserves; secondly, central banks in developed markets tend to tolerate slightly higher than target inflation levels in the long run, eroding the purchasing power of euro and other fiat currencies; thirdly, the monetary devaluation expectation brought about by fiscal deficit expansion and tariff policies in Western countries, giving gold an additional premium support beyond historical relevance; fourthly, the latest central bank gold purchase data shows that structural demand remains very firm, and Barclays Bank believes that with geopolitical tensions easing, central banks from emerging markets that have previously sold gold reserves are likely to resume their holdings. At the options market level, according to the latest prediction from Barclays' derivative strategy team, market positioning and option pricing indicators have significantly normalized from extreme levels at the start of the year. The Barclays derivative team states that the most notable aspect is that the implied volatility of +call options has reversed from deep premiums at the start of the year to near-decade lows, while the skewness of put options, due to rising hedging demand, has risen to near-decade highs; this major structural change in the gold options market implies that the cost-effectiveness of capturing asymmetric returns to the upside through options has greatly increased, and the overall clearing of market sentiment has laid a healthier technical foundation for a new round of gold price increases. International bank UBS expects gold prices to rebound to around $5200 in the next year, with the core reason being a weakening dollar, continued central bank gold purchases, and market misinterpretations of the future direction of Fed monetary policy. In other words, in the eyes of these financial giants, the $3900-4000 region may become a "pressure bottom area" for the second phase of the gold bull market, with short-term momentum still oscillating between declines and the long-term tug of war between central banks/fiscal deficits/de-dollarization buying pressure; if non-farm and inflation data continue to strengthen rate hike expectations, gold prices may still complete one final drop before launching a more quality super rebound trend.