Gold: Trend Reversal or Range-bound Impulse?

On the evening of July 2, after the release of the US June non-farm payrolls, London gold surged nearly 2%, ending a four-week losing streak and closing at $4,174/oz. We need to calmly answer one question: is this rebound in gold prices the beginning of a trend reversal, or is it just a pulse at the upper end of its range?

I. Bottom Support: Central Banks “Support But Not Propel” Gold Prices

Central bank buying remains the fundamental “stock” support for gold prices. According to the World Gold Council (WGC)'s “2026 Central Bank Gold Reserve Survey” released in mid-June: 45% of surveyed central banks plan to increase their gold holdings in the next 12 months, a record high; 89% of central banks expect the proportion of global gold reserves to continue to rise. Since 2022, annual central bank gold purchases have averaged around 1,000 tons, doubling from 500 tons over the previous decade. Currently, gold has surpassed US Treasury bonds (27% vs 22%) as the world’s largest official reserve asset.

WGC June Central Bank Reserve Survey

However, WGC also did the math: on top of a baseline average annual purchase of 600 tons, buying an additional 20-30 tons would only push up gold prices by about 1%. The signal from central bank gold buying is far more significant than its marginal effect on pricing. It can support gold prices around $3,800-$3,900, but alone it cannot drive a breakthrough. The real determinant of direction is interest rate expectations and risk appetite.

II. Fundamentals: The Three Major Catalysts Have Not Continued to Exert Force

To determine whether the rebound can escalate into a reversal, the core focus should be on the catalysts driving gold prices. In its “Mid-Year Gold Outlook 2026” released on July 1, WGC put the baseline scenario for gold prices in the second half of the year at 4100±5% (corresponding to a range of about $3,895-$4,305/oz), and clearly stated: for gold to regain an upward trend, at least one of the three major catalysts must continue to exert force:

① Significant deterioration in geopolitical risks; ② Trend reversal in interest rate expectations; ③ Long-term allocation capital flowing back.

Comparing to the current market, this non-farm-led rebound only scratched the “edge” of the second point, i.e., a downgrade of rate hike expectations due to weaker single-month data. However, FedWatch data shows the probability of a Fed rate hike in December remains around 77%, far from a “trend reversal.” Both geopolitically and in terms of capital flows, the outlook remains less favorable: geopolitically, shipping in the Strait of Hormuz has recovered to pre-war levels; on the capital side, real rates remain high, with the SPDR Gold ETF still languishing at low levels and no sustained net inflows observed.

CME FedWatch ShowsChanges in Probability of Fed Rate Hike at September FOMC

III. Technicals: Oversold Correction Rather Than Trend Reversal

At the indicator level, the RSI (14-day) has recovered from the extremely oversold zone in late June to near 40, moving out of the panic selling area, but it has yet to enter the bullish dominance zone (typically above 50-55); the MACD dual lines also remain below the zero axis. Both point to the same judgment: the bulls have not yet regained dominance.

Spot Gold (London) Price Performance Over Past Three Months with MACD & RSI

IV. Conclusion: Range-bound Fluctuation Remains Gold’s Reasonable Pricing Pattern

Returning to the initial question, our core judgment is as follows:in the coming weeks, gold prices are expected to remain range-bound. From a medium- to long-term perspective, gold benefits from central bank buying, excessive monetary issuance, and the reconstruction of the global reserve system, so its long-term value direction is clear.

In the short term, focus on the US June CPI and the Fed’s July FOMC meeting: if core CPI falls and the FOMC leans dovish, the “reversal in interest rate expectations” in the WGC framework may truly begin; if CPI remains resilient and FOMC remains hawkish, then the non-farm rally will be disproved. Before CPI and the FOMC provide clear direction, responding with a broad range framework of 3900-4300 may be more effective than betting on a unilateral breakout.