Gold sinks below $4,000 as traders eye Fed rates

Gold has entered bear market territory, sliding below US$4,000 an ounce for the first time since November 2025 as rising interest rate expectations and a strengthening dollar weigh heavily on bullion, though local traders argue the dip may not last long.

Siriluck Pakotiprapha, vice-president of research at Hua Seng Heng Futures, said a decline below $4,000 has significant implications for gold, which has tripled in price over the past three years from about $1,800 an ounce in 2023.

The recent pullback, driven by a stronger US dollar, rising real yields and hawkish Federal Reserve signals, has resulted in gold prices tumbling roughly 28-30% from an all-time high of nearly $5,600 per ounce in January this year.

Spot gold was down 0.4% to $3,974.89 per ounce yesterday after hitting its lowest level since Nov 20 on Wednesday.

Traders expect three Fed rate hikes this year and are pricing in a 67% chance of a September increase, according to the CME FedWatch Tool.

The US dollar advanced for a third straight session on Wednesday to hit a 13-month high, making gold more expensive for buyers holding other currencies.

"The market is worried about Fed chair Kevin Warsh's statement earlier this month about sticky inflation in the US, which has remained above the central bank's 2% target since April 2021," Ms Siriluck said.

If gold cannot bounce back to a key support level of $4,500, she said there is a possibility the price could fall further to $3,800, which would be roughly 61,000 baht per baht-weight of domestic gold bar.

Hua Seng Heng, Thailand's largest gold trader, predicts the next support level for the precious metal at $3,500-3,600 an ounce, or 58,000-59,000 baht per baht-weight of domestic gold bar.

Several major banks have trimmed forecasts. Goldman Sachs reduced its year-end target by $500 to $4,900 an ounce, while Deutsche Bank cut its fourth-quarter estimate by 17%. Outflows from exchange-traded funds (ETFs) have removed a traditional support for prices.

However, Ms Siriluck said the price contraction may not last long, as oil prices have declined significantly, easing inflation in many economies, particularly the US.

"Once inflationary pressure eases, the Fed might adopt a less hawkish stance," she noted.

Gold prices should bottom out at around $3,500-3,600 an ounce by the fourth quarter, said Ms Siriluck, which is traditionally the peak season for gold buying.

Fundamental support for gold remains, particularly central bank buying and the de-dollarisation trend. Imports from China, the world's largest gold consumer, remain solid, rising 78% year-on-year to 692 tonnes in the first five months of 2026.

Tipa Nawawattanasub, chief executive of YLG Bullion and Futures, said structural drivers such as persistently high public debt across major economies and rising digital gold demand, including tokenised gold and reserve-like digital assets, underpin support for gold, despite near-term risks from energy-driven inflation and ETF outflows.