News/Fundamental Analysis (Latest as of May 2026) $Gold - main 2608(GCmain)$
The latest US inflation data (April CPI 3.8% year-on-year, core CPI 2.8% year-on-year) both exceeded market expectations, significantly cooling market expectations for a Fed rate cut and even raising the probability of a rate hike. The US dollar and US Treasury yields continued to rise.
In a high-interest-rate environment, the holding cost of gold as a non-interest-bearing asset has increased significantly, leading to a continuous outflow of funds from the gold market into interest-bearing assets such as bonds. This is the core reason for the recent continuous decline in gold prices.
The market currently widely expects that the probability of a Fed rate cut in 2026 is extremely low, with a probability of no rate cut or even a rate hike exceeding 80%. This hawkish expectation will continue to suppress gold prices.
Geopolitics and Demand: Weakening Safe-Haven Support, Pressure on Physical Demand
The market's anticipated escalation of tensions in the Middle East failed to generate sustained safe-haven buying. Instead, as the situation eased, the geopolitical risk premium continued to diminish, reducing the attractiveness of gold as a traditional safe-haven asset.
India, the world's second-largest gold consumer, announced an additional import tax on gold, causing a sharp drop in physical demand and further weakening support for gold prices.
Medium- to Long-Term Support: Central Bank Gold Purchases Continue
Although short-term negative factors dominate, central banks around the world continue to increase their gold reserves. This will provide medium- to long-term support for gold prices, limiting the downside potential and preventing extreme one-sided price crashes.
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