After reaching a record high of $3,500 per ounce in April, gold has since lost momentum and retreated by roughly 5%. The pullback surprised many observers who had expected persistent geopolitical tensions and a weaker dollar to push prices higher. HSBC’s chief precious metals analyst, James Steele, views the recent move as the start of a broader correction and aligns with other commentators, including some at Citi, who have warned of a substantially larger decline.
HSBC cites several reasons for expecting lower gold prices:
- Safe-haven demand has weakened as the most extreme trade-war scenarios have not come to pass.
- U.S. tariff negotiations and a more compromise-oriented stance from the administration have eased concerns about rapid deglobalization.
- Markets have so far navigated a series of geopolitical and economic shocks without forcing investors into heavy defensive positions.
- Higher bullion prices have discouraged some physical buyers, reducing purchases of coins and jewelry.
At the same time, central bank buying has remained a steady support for the market. For three years running, official institutions have added more than 1,000 tonnes of gold annually, signaling ongoing diversification into the metal. That persistent demand from monetary authorities provides a counterweight to weaker private investor interest and can limit the depth of any sell-off.
Steele adjusted his near-term forecasts upward, projecting an average price of $3,215 for 2025 and $3,125 for 2026, which reflects the recent volatility and central bank purchases. However, his long-term target remains substantially lower at $2,350 per ounce, implying that he expects significant downside over a longer horizon once temporary supports fade.
In sum, the market is balancing two opposing forces: resilient official demand and elevated prices that have curtailed retail and jewelry buying, against a reduction in risk-driven investor flows and easing geopolitical fears. Investors and analysts will be watching economic indicators, central bank activity, and any resurgence in safe-haven demand closely to determine whether this correction proves short-lived or the start of a more extended decline.