Image source: Getty Images
Gold has recently suffered significant losses, which peaked last week amid expectations that this downward wave will continue for some time amid the availability of conditions that prepare the precious metal for further decline.
The decline of the precious metal worsened after the Federal Reserve announced the stabilization of the main interest rate, which came amid the central bank’s rhetoric tending to resume raising interest rates at least once before the end of this year.
This speech led to a rise in the US dollar, which has an inverse relationship with gold, which is the main reason for the current collapse.
There are other factors present in the global economic scene and the financial markets and their movements that will make the current setback for the precious metal worse.
But on the other hand, there are some factors that provide support for the precious metal, including central banks’ purchases of gold and the levels of gold reserves at these monetary institutions.
Wael Al-Nahhas, a financial markets expert, told the BBC: “Gold broke important support levels in the recent period, and this is most likely the result of the tendency of major investment funds to cover short positions and open positions through extensive sell-offs.”
He added: “Monthly and quarterly settlements were made in giant investment funds and financial institutions that also involved sales of the precious metal. These entities also sold gold as part of operations to diversify the contents of their investment funds, which contributed to weakening gold,” stressing that the current decline is an opportunity to buy gold.
Can the Egyptian pound consolidate in the coming days?
Most read end
An in-depth explanation of the most prominent events and topics, to help you understand the most important variables around you and their impact on your life
Episodes
End podcast
What do we know about the new Chinese gold?
Gold currently stands in the area of $3,475 per ounce, while analysts believe that it must test support in a range extending from $3,300 to $3,400 per ounce so that it can find a bottom from which it can start in the upward trend again.
Observers believe that the current downward wave is very similar to the collapse that gold suffered in 2008.
The precious metal suffered a severe collapse in 2008 during the global economic crisis due to the intense need that dominated investors in the financial markets for liquidity and the desire to liquidate assets that do not generate a return, such as gold, in order to obtain dollar liquidity that would be more effective in times of crises.
This crisis, which was known at the time as the “Dash for Cash,” caused a great demand to sell gold to obtain liquidity, which is more useful in transactions during the global financial crisis.
Gold declined during that crisis, which began after the collapse of Lehman Brothers in 2008, to $700 per ounce in October of the same year, compared to the highest peak the price reached in March at $1,000 per ounce.
Investment funds and gold
There is support from purchases of exchange-traded funds (EFTs) that resort to gold in order to diversify their content of trading instruments in global financial markets.
Geopolitical tensions in the Middle East play a fundamental role in supporting precious metals in general, amid the cessation of US-Israeli military operations against Iran and talk of a possible Qatari-brokered agreement.
US interest and bond yields
Recent comments from Fed officials, including indications that “current quantitative tightening remains the best option,” along with dissenting opinions that have emerged that reflect a stronger desire to maintain higher interest rates, have reinforced market expectations that the central bank has not yet finished tightening monetary policy.
Expectations of raising interest rates next December and then implementing another increase in early 2027 still support US Treasury bond yields and the dollar, both of which are negative factors affecting gold.
Shadi Abdo, Director of Market Research at OW Markets, believes that “the recent declines in gold prices reflect a shift in US monetary policy expectations, especially after the Federal Reserve’s decision to stabilize interest rates amid the possibility of resuming monetary tightening.”
He explained, "The pressures on gold are not related to the interest rate decision alone, but rather to its impact on the US dollar and Treasury bond yields, especially real yields, which directly affect the attractiveness of the precious metal."
While policymakers expressed increasing confidence in the economy's fundamental strength, Federal Reserve Chairman Kevin Worsh acknowledged that financial and credit conditions had become less accommodative.
However, he did not indicate that he had reached the conclusion that monetary conditions had become “tight.”
Abdo pointed out the importance of monitoring the difference between two- and ten-year US bond yields, as it is an indicator of monetary policy expectations and economic growth, explaining that a rise in short-term yields at a faster pace may reflect expectations of further quantitative tightening, while their decline at a faster pace may indicate expectations of an interest rate cut, which may support gold.
He added that central bank purchases and ETF flows remain important factors in determining gold's direction, while the decline of geopolitical tensions in the Middle East may lead to a decline in demand for the precious metal as a safe haven.
There is an inverse relationship between US Treasury bond yields and gold, as the rise in these yields generates downward pressure on the precious metal.
Abdo indicated that gold may remain under selling pressure until the end of 2026 if the dollar continues to strengthen and real yields rise.
Central bank purchases
Another emerging concern is the behavior of central banks themselves.
Over the years, official sector purchases have been one of the main pillars supporting gold prices.
However, recent reductions in reserves at some institutions, including the Russian Central Bank, indicate that not all central banks are increasing their holdings.
According to World Gold Council data, Russia recorded net gold sales of about 44 tons during the first half of 2026, making it one of the largest established sellers globally.
Abdo pointed out that “the continuation of institutional demand or a decline in returns may limit losses and pave the way for its recovery during the year 2027.”
Investment flows also remain a decisive factor in the path the precious metal takes up and down.
Gold ETFs have played a historical role in amplifying the waves of ups and downs in metal prices.
Any slowdown in purchases by these funds, or their conversion to sustainable outflows, is likely to add further downside pressure as institutional and retail investors reduce their exposure to gold.
Gold and circumventing sanctions
Gold reserves at the Russian Central Bank have witnessed a noticeable decline in the recent period. Data from the World Gold Council confirmed that these stocks fell to their lowest levels in seven years.
Russia's gold reserves fell to 2,282.98 tons in the second quarter of 2026, compared to 2,304.75 tons in the first quarter of 2026, according to data issued by the World Gold Council.
Russia's gold reserves averaged 1,224.89 tons in the period from 2000 to 2026, reaching an all-time high of 2,335.85 tons in the second quarter of 2024, and a record low of 343.41 tons in the second quarter of 2000.
Al-Nahhas believed that there was a relationship between the diesel deal between the United States and Russia and the shortage witnessed in the Russian Central Bank’s gold reserves, as he suggested that it was a “green light” for Russia to sell more gold to China within the framework of “secret” deals so that it could meet its financing needs.
Al-Nahhas stated, "Russia does not deal transparently with international institutions regarding its gold reserves, with the aim of circumventing the sanctions imposed by the West on Moscow."
He also suggested that China "is following the same approach so that it can seize opportunities and buy gold at a huge discount that Russia deducts from the original price without there being any proof that Beijing is circumventing the sanctions."
Oil is a major reason
The rise in oil prices due to geopolitical tensions in the Middle East is one of the main indirect reasons for the decline in global gold prices.
Some countries were forced to sell gold reserves in their central banks in order to provide financing needs that arose due to the sharp rises in the prices of oil and other energy products.
Al-Nahhas said, "Türkiye is at the forefront of countries that sold gold reserves in order to provide financing to purchase energy products."
A report published by Bloomberg Economic Network stated that the Turkish Central Bank sold an estimated value of about eight billion dollars (60 tons of gold) of gold reserves.
One month before these massive sales, reports also indicated to Reuters that Türkiye sold about 50 tons of gold reserves held by the Turkish Central Bank.
Find out more
Short clips
End of short clips
