Can Gold Prices Rise After the Recent Pullback? Why JPMorgan Still Sees Gold Heading Toward $4,500

On July 7, international gold prices saw a notable pullback after last week’s strong rebound. Spot gold opened higher but trended lower throughout the day. During the Asian session, it briefly hit a two-week high of $4,202.73 per ounce, but then declined, reaching a low of $4,128.39 per ounce during US trading hours. By the close, spot gold settled at $4,165.13 per ounce, down 0.25% for the day. At one point, it dipped below the $4,140 mark, posting an intraday loss of 0.60%.

This round of correction is not an isolated event. A combination of macro factors—including a modest rebound in the US Dollar Index, persistently high US Treasury yields, profit-taking, and improving risk appetite—have all converged to exert short-term downward pressure on gold prices.

Meanwhile, JPMorgan Chase released its latest precious metals outlook on July 6, lowering its Q4 2026 gold price target from around $6,000 to $4,500 per ounce—a 25% reduction. This major revision has drawn widespread market attention. Does such a significant downgrade signal a fundamental shift in the long-term outlook from this "gold bull market champion"? By examining the drivers behind the July 7 gold price correction, we can analyze the real reasoning behind JPMorgan’s target adjustment, identify the key variables shaping gold’s next move, and synthesize mainstream market views to assess the future direction of gold prices.

Why Did Gold Prices Suddenly Fall? The Dual Pressure of a Stronger Dollar and Rising US Treasury Yields

US Dollar Index Strengthens Moderately

Since gold is priced in US dollars, fluctuations in the dollar’s exchange rate have a direct and significant impact on gold prices. On July 7, the Dollar Index (DXY) strengthened at the open, pared some gains during the session, briefly touched the 101 mark, and ultimately closed at 100.86—almost unchanged from the previous trading day. The week before, weaker-than-expected June nonfarm payroll data had pushed DXY down by 0.5%, but the new trading week saw a technical rebound in the dollar.

A stronger dollar makes gold more expensive for overseas investors holding other currencies, directly dampening physical demand. Somesh Kapuria of Hola Prime commented that gold has been in a downtrend since the start of the year, and dollar strength continues to weigh on the precious metal.

US Treasury Yields Remain Elevated

As a non-yielding asset, gold’s opportunity cost is closely tied to real interest rates. When US Treasury yields rise, gold becomes less attractive by comparison. On July 7, the benchmark 10-year Treasury yield traded around 4.467% to 4.48%. The market displayed a "short-end down, long-end up" yield curve dynamic: the 2-year yield stood at 4.108% to 4.116%, while the 30-year yield climbed to 4.984%. This structure reflects an accelerating repricing of the Fed’s policy path.

Weak jobs data has directly lowered market expectations for further Fed rate hikes. In June, the US added just 57,000 nonfarm jobs—less than half the 110,000 expected—while April and May figures were revised down by a combined 74,000. Interest rate swap markets now price in about a 36% chance of a 25-basis-point hike at the July FOMC meeting.

Profit-Taking and Technical Correction

After several days of gains, gold prices had built up significant short-term momentum. On July 6, spot gold briefly surged to $4,202.09 per ounce, a two-week high. Some traders opted to lock in profits ahead of the Fed meeting minutes release, amplifying the day’s pullback.

Improved Risk Appetite for Risk Assets

On July 7 (Beijing time), all three major US stock indices closed higher. The Dow Jones Industrial Average rose 0.29% to 53,055.91, breaking above 53,000 for the first time ever. The S&P 500 gained 0.72% to 7,537.43, and the Nasdaq Composite climbed 1.12% to 26,121.16. This renewed risk appetite diverted some capital away from gold as a safe-haven asset.

Easing Risks in the Strait of Hormuz

Geopolitically, risks in the Strait of Hormuz have shifted from acute shock to manageable concern. OPEC+ hints at increased production and a steady recovery in shipping activity have led to a decline in oil prices, with Brent crude settling at $71.99 per barrel. Oil prices have essentially returned to pre-strike levels before US and Israeli military action against Iran, easing short-term inflation fears. This cooling of geopolitical risk has reduced gold’s safe-haven premium.

Key Assessment: The Nature of the Correction

Overall, this decline is mainly a short-term, macro-driven technical adjustment rather than a fundamental shift in gold’s long-term pricing logic. In fact, weak jobs data has lowered market expectations for Fed rate hikes, which supports gold’s medium- to long-term outlook rather than undermining it.

Why Does JPMorgan Still Stick to a $4,500 Target? The Logic Behind the Downgrade from $6,000

In its latest research report released July 6, JPMorgan lowered its Q4 2026 gold price target from around $6,000 to $4,500 per ounce and forecasts an average price of $4,300 for Q3. This is a substantial revision—a 25% cut.

Short-Term Logic Behind the Downgrade

JPMorgan notes that, in the short term, gold prices may be constrained by weakening purchasing power in key demand sectors and are likely to remain range-bound. Gold has become sensitive again to changes in real interest rates, which could limit further price gains. Additionally, this year’s main sources of gold demand may not be as strong as previously expected, prompting the bank to revise down its forecast for gold’s upside potential.

Long-Term Bullish Logic Remains Intact

Despite the lower short-term target, JPMorgan maintains a bullish long-term stance on gold. The bank expects gold to gradually recover in the second half of 2026, with Q3 averaging around $4,300 per ounce and Q4 rising to about $4,500. Looking ahead to 2027, JPMorgan believes gold could continue its upward trend, driven by ongoing central bank purchases, stronger physical demand, and persistent structural allocation needs. These factors will continue to support gold’s long-term appeal as a safe-haven and reserve asset.

The core factors supporting this view include:

Ongoing Central Bank Gold Purchases. Central bank buying has become the most stable incremental source of demand in gold’s structure. While the latest global central bank gold reserve survey data is not fully presented above, most institutions agree that central bank buying is one of the strongest pillars of gold’s long-term bull market. This demand is unique in its price insensitivity—central banks buy gold primarily for reserve diversification, de-dollarization, and geopolitical hedging, rather than reacting to short-term price swings.

Geopolitical Risks remain a key driver in gold pricing. While risks in the Strait of Hormuz have eased from acute shock to manageable concern, US-Iran negotiations have stalled, with no resolution on nuclear issues, sanctions relief, security guarantees, or long-term management of the strait. Ongoing geopolitical disruptions will continue to provide a risk premium for gold.

Widening US Fiscal Deficit forms a structural long-term support for gold. The ever-increasing US debt load fundamentally undermines dollar credibility and enhances gold’s appeal as an alternative reserve asset.

The Prospect of the Fed Returning to a Rate-Cutting Cycle is a core macro driver for gold’s medium- to long-term strength. While the market still expects the Fed might hike rates again this year, weak jobs data is gradually shifting policy expectations. Should economic data continue to disappoint and markets fully price in easier monetary policy, falling real rates would open up more upside for gold.

JPMorgan’s reduction of its target from $6,000 to $4,500 is a pragmatic adjustment reflecting short-term demand weakness and sensitivity to real rates—not a rejection of the long-term trend. The bank’s expectation for continued gains into 2027 and beyond is built on ongoing central bank buying, stronger physical demand, and persistent structural allocation needs.

Five Key Variables: The Core Factors Determining Gold’s Next Move

Gold’s pricing system is multifaceted. The following five variables form the core framework for determining the next phase in gold prices.

US Dollar Index

There is a stable and significant negative correlation between the US Dollar Index and gold prices. A stronger dollar raises the cost of gold for non-dollar holders and signals both US economic strength and tighter Fed policy—both of which weigh on gold. On July 7, DXY traded in the 100.85–101.035 range. The dollar’s future direction will depend heavily on US economic data and the relative strength of monetary policy among major global economies. If weak US data prompts a dovish Fed pivot, the dollar could weaken, providing a catalyst for gold.

Rate Cut Expectations

Rate cut expectations are the most flexible variable in gold pricing. As a non-yielding asset, gold’s opportunity cost is set by real interest rates—rate cuts are the most direct monetary policy tool to lower real rates. Currently, the market’s outlook for the Fed’s policy path remains in flux. After the June payrolls report, expectations for a July rate hike have cooled significantly. Going forward, close attention should be paid to US inflation data, labor market trends, and Fed policy signals. Once rate cut expectations shift from "possible" to "probable," gold could gain strong upward momentum.

US Treasury Yields

US Treasury yields—especially real yields—are the most direct anchor for gold pricing. On July 7, the 10-year yield stood at 4.467%–4.48%, and the 2-year at 4.108%–4.116%. The yield curve is showing signs of steepening—short-term yields are falling while long-term yields rise, reflecting cooling expectations for near-term policy tightening but rising concerns about long-term fiscal and inflation risks. This structure is generally positive for gold: falling short-term rates lower gold’s opportunity cost, while rising long-term rates signal inflation and fiscal worries, which are bullish for gold.

Central Bank Gold Purchases

Central bank buying is the most reliable variable on the demand side for gold. Most institutions agree that central bank purchases are the strongest driver of gold’s long-term bull market. This buying is motivated by reserve diversification and de-dollarization strategies rather than short-term price movements. As a result, even if gold faces short-term pressure, central bank demand provides a solid price floor.

Inflation

Inflation affects gold pricing through real interest rates. When nominal rates are steady but inflation rises, real rates fall, reducing gold’s opportunity cost. Oil prices have fallen back to pre-strike levels from February, with Brent crude at $71.99, easing short-term inflation pressure. However, ongoing geopolitical uncertainty means energy prices could remain volatile. The market is also alert to inflationary effects from the AI industry, and rising global temperatures are expected to further push up prices. Changes in inflation expectations will continue to influence real rates and, in turn, gold pricing.

Does Gold Still Have Upside? Mainstream Market Views and Scenario Analysis

Market opinions on gold’s outlook are diverging, with major institutions offering differing judgments based on various frameworks.

Optimists: The Long-Term Bull Market Isn’t Over

The bullish camp believes the long-term case for gold remains intact. Structural support from central bank buying, normalized geopolitical risk, and the ongoing expansion of the US fiscal deficit together form gold’s "core assets" for long-term pricing. Goldman Sachs has lowered its end-2026 gold target from $5,400 to $4,900, but still emphasizes that global central banks are buying about 51 tons per month—three times the pre-2022 pace—making this the strongest support for gold’s long-term bull market. State Street Bank also offers a relatively optimistic outlook.

The core logic for optimists is that short-term macro headwinds (dollar strength, high yields) are cyclical, while central bank buying, de-dollarization, and fiscal imbalances are structural—structural forces will ultimately outweigh cyclical resistance.

Cautious Camp: Choppy Q3, Renewed Strength in Q4

The cautious camp takes a more pragmatic view. JPMorgan expects an average gold price of $4,300 in Q3, with prices likely to remain range-bound in the short term. This view is based on weakening purchasing power in key demand sectors and gold’s renewed sensitivity to real rates. The market still expects the Fed may hike again this year, and rate cut expectations have not yet meaningfully increased. Until the Fed’s policy path becomes clearer, gold lacks the momentum to break out of its current range.

The cautious camp expects gold to consolidate between $4,100 and $4,300 in Q3. As the macro environment becomes clearer in Q4—if economic data continues to weaken and rate cut expectations rise—gold could regain strength, moving toward $4,500 or higher.

These two perspectives are not mutually exclusive, but rather reflect different time horizons. In the short term, a technical rebound in the dollar, elevated Treasury yields, and weaker purchasing power in some demand sectors are real headwinds for gold. The probability of gold consolidating between $4,100 and $4,300 in Q3 is high.

But in the medium term, the structural drivers for gold’s rally remain intact. Strategic central bank demand, the widening US fiscal deficit, and persistent geopolitical risks all provide a solid foundation for gold’s long-term bull market. Once Fed policy expectations shift from "pause" to "easing," gold could enter a new upward trend.

Conclusion

Gold’s pullback to $4,165.13 on July 7 was driven by a combination of factors: a stronger dollar, elevated Treasury yields, profit-taking, and easing geopolitical risks—a textbook example of a macro-driven short-term adjustment rather than a reversal of gold’s long-term fundamentals.

JPMorgan’s cut of its Q4 target from $6,000 to $4,500 is a pragmatic response to short-term demand weakness and heightened sensitivity to real rates. However, the bank’s outlook for continued gains into 2027 and beyond remains unchanged, with central bank buying, stronger physical demand, and structural allocation needs still forming the backbone of gold’s long-term pricing.

Gold’s next move will be shaped by five key variables: the US Dollar Index, rate cut expectations, US Treasury yields, central bank buying, and inflation. In the short term, gold is likely to consolidate between $4,100 and $4,300 in Q3. In the medium term, if the macro environment turns more accommodative, gold could regain strength in Q4, moving toward $4,500 and beyond.

For gold investors, understanding both the short-term drivers of volatility and the structural forces behind long-term trends is crucial—staying rational during corrections and positioning for the trend when it emerges may be the most pragmatic strategy in today’s market.

FAQ

Q1: Why did gold prices fall on July 7?

On July 7, spot gold dropped to $4,165.13 per ounce, mainly due to a moderately stronger US Dollar Index (DXY briefly hitting 101), 10-year Treasury yields holding above 4.467%, profit-taking after earlier gains, and easing risks in the Strait of Hormuz. This decline is a macro-driven, short-term technical correction.

Q2: What is JPMorgan’s latest forecast for gold?

JPMorgan expects gold to average $4,300 per ounce in Q3 2026 and $4,500 in Q4. The bank has lowered its Q4 target from around $6,000 to $4,500 but maintains a bullish long-term stance, projecting continued gains into 2027 as central bank buying and physical demand remain structurally strong.

Q3: How much impact do central bank gold purchases have on prices?

Central bank buying is the most stable incremental source of gold demand. Most major institutions view it as one of the strongest drivers of gold’s long-term bull market. Central bank purchases are motivated by reserve diversification and de-dollarization strategies rather than short-term price movements, providing a solid price floor for gold.

Q4: What is the outlook for gold in the second half of 2026?

Mainstream forecasts expect gold to consolidate between $4,100 and $4,300 in Q3, with the potential to strengthen in Q4. The key factors will be whether US economic data continues to weaken, if rate cut expectations rise, and whether geopolitical risks escalate again.

Q5: Has gold’s long-term bull market ended?

Mainstream institutions believe the long-term bull market for gold is not over. Central bank buying, geopolitical risks, and the widening US fiscal deficit remain structural drivers. Goldman Sachs forecasts gold to reach $4,900 by the end of 2026, while UBS has a 12-month target of $5,200. Short-term macro headwinds are cyclical, but structural support remains long-term.