Short-term gold forecasts have been revised downward, reflecting the repricing of Federal Reserve expectations and the rise in short- and long-term interest rates observed in recent weeks.

Gold is anticipated to trade towards the lower end of recent ranges in the near term, pending greater clarity on the outcome of the conflict in the Middle East.

While ETF inflows have slowed materially, central bank purchases continue at a solid underlying pace.

From hero to zero

Since late February, investor activity in gold and the wider precious metals complex has come to a standstill. IMM futures data are effectively unchanged, indicating that institutional investor interest in gold has stalled (Chart 1). Open interest has also flatlined. ETFs experienced large outflows in March, the largest monthly decline since 2021, and inflows since then have slowed to a trickle. Retail interest in gold has declined significantly overall.

This decline in retail interest is mirrored in the options market. Front-end volatilities have receded in recent weeks to just above 20% — down from highs of just under 40% in late March. Three-month XAU/USD risk reversals, which measure the relative cost of an XAU call / USD put versus an XAU put / USD call, are now modestly skewed towards XAU puts. This move in risk reversals has tracked XAU/USD spot prices over the recent period and is therefore not considered a leading indicator for the weeks and months ahead.

Taken together, the data and sentiment point to a substantial decline in short-term appetite for long gold positions. Longer-term sentiment towards gold, however, remains constructive — suggesting that recent weakness is best characterised as a pause within gold's broader upward trend.

Rate repricing

The sharp rise in oil prices has triggered a material repricing of front-end yields — markets have fully priced out Federal Reserve rate cuts and have begun to price in a potential 25 bp rate hike by Q1 2027. A similar pattern of rate repricing is observable across other major central banks. This broad-based rise in nominal yields increases the opportunity cost of holding long gold positions. The upward shift in rate hiking expectations reflects both realised and anticipated inflation pressures, with contemporaneous US inflation having risen in recent months towards an annualised rate of 4% (Chart 4) — illustrating the scale of the shift underway.

Last year's decorrelation between real rate expectations (US 10-year TIPS yields) and gold was not sustained. The recent rise in ten-year TIPS yields has weighed on gold prices, consistent with the historical relationship whereby higher real interest rate expectations are typically conducive to gold price declines. Model estimates suggest that a 1% rise in TIPS yields is consistent with a decline in spot prices of just over USD 100 per oz. The critical question for gold is whether the rise in TIPS yields will prove durable — current analysis does not point in that direction.

The rise in ultra-long end yields (30-year) to above 5% in both the US and the UK is not, in itself, an adverse development for gold. The question of causality is crucial: rising yields at the long end reflect concerns over sustained inflation — which is positive for gold on a compounding basis — as well as concerns over excessive debt levels, which provide marginal near-term support for the metal.

The key short-term catalyst for gold — and for central bank rate-setting expectations more broadly — remains the resolution of the closure of the Strait of Hormuz (SoH). The base case is that oil market inventory drawdowns should become increasingly pronounced in the coming weeks, forcing a resolution of the situation one way or another. Such a resolution would carry several immediate implications: it would likely reduce front-end yields, as central banks would be better positioned to look through supply-side inflation dynamics; and it would likely result in a modestly weaker USD, providing marginal upside support for gold.

Changing demand profile

At the beginning of the year, gold forecasts were revised upward to reflect the substantial rise in retail-focused demand — particularly from the ETF sector. ETF inflows had added over 400 tonnes in Q4 2025, illustrating a significant upswing in retail demand. This demand assumption no longer holds to the same extent, given the slowdown observed since March, which warrants a downward revision to short-term gold forecasts.

While central bank demand has continued at a robust pace — 244 tonnes in Q1 — the marginal driver of gold prices since Q4 2025 has been retail demand. Central bank purchases are expected to add approximately 800 tonnes to global reserves in 2026, which should continue to limit material downside risks for the metal. Despite several rumours of aggressive central bank sales in Q1, the latest data from the World Gold Council do not support this narrative.

Estimates for coin and bar demand remain unchanged, with retail physical demand expected to total approximately 1,400 tonnes for the year. Q1 bar and coin demand came in at around 470 tonnes — the largest quarterly rise on record. The primary risk to this demand component is India's recent decision to raise its gold import levy to 15%.

The opinions expressed herein are correct as at 21 April 2026 and are subject to change without notice. This information should not be relied upon by the reader as research or investment advice regarding any particular fund, strategy or security. Past performance is not a guide to current or future results. Any forecast, projection or target, where provided, is indicative only and is not guaranteed in any way.