Despite gold’s long-standing reputation as a safe-haven asset during periods of geopolitical and economic uncertainty, the precious metal has recently moved against the expectations of many investors. Prices have come under significant selling pressure, even as energy markets remain volatile and geopolitical risks continue to escalate, particularly in the Middle East.
The current market environment highlights the increasingly complex relationship between gold and broader macroeconomic forces. Geopolitical tensions alone are no longer sufficient to drive prices higher, as monetary policy expectations, the strength of the US dollar, Treasury yields, inflation forecasts, and investor positioning have become dominant market drivers.
While some investors continue to expect gold to resume its upward trajectory during the second half of the year, others believe the metal is undergoing a healthy correction following the record highs reached in recent months, raising questions over whether the current decline represents a temporary pullback or the beginning of a broader market shift.
In an interview with Lana, Ole Hansen, Head of Commodity Strategy at Saxo Bank, said the current weakness in gold is not the result of a single factor, but rather a combination of macroeconomic and financial developments, including a stronger US dollar, rising bond yields, interest rate expectations, and the inflationary implications of oil market developments linked to the Strait of Hormuz.
Gold Prices Remain in a Sharp Correction
Hansen said gold remains in a sharp correction, driven primarily by the liquidation of long positions amid concerns over higher funding costs following the recent surge in energy prices. Although inflation has eased recently, he noted that technical selling pressure and negative market momentum, reinforced by a stronger US dollar, continue to weigh on prices.
The Biggest Headwinds for Gold
According to Hansen, the strongest headwinds facing gold are the renewed strength of the US dollar, supported by expectations that the Federal Reserve may continue tightening monetary policy. Additional pressure has come from technical selling and declining safe-haven demand as markets reassess geopolitical risks in the Middle East.
How the Strait of Hormuz Is Affecting Gold
Discussing the impact of developments surrounding the Strait of Hormuz, Hansen explained that the issue has become a negative factor for gold through its effect on inflation expectations. Rising oil supply risks fuel inflation concerns, increasing expectations of a more hawkish Federal Reserve. This, in turn, pushes Treasury yields and the US dollar higher, reducing the appeal of a non-yielding asset such as gold.
Why Investors Are Selling Gold
Hansen said investors have been reducing their gold holdings after market momentum turned negative following the break of key technical support levels. The stronger dollar and expectations of tighter US monetary policy have accelerated selling, while the continued resilience of global equity markets has further reduced the need for alternative safe-haven assets.
Why Gold Has Not Benefited From Higher Oil Prices
Hansen explained that energy supply shocks differ fundamentally from financial crises or economic growth shocks. Higher oil prices push inflation higher, encouraging central banks to maintain restrictive monetary policies and strengthening the US dollar—factors that collectively weigh on gold prices. As a result, expectations for higher interest rates have outweighed gold’s traditional appeal as both an inflation hedge and a safe-haven asset.
Outlook for Gold
Looking ahead, Hansen believes gold may continue to face near-term challenges as long as the US dollar, Treasury yields, and technical momentum remain elevated. However, he noted that the recent correction has helped rebalance investor positioning, potentially limiting further liquidation of long positions.
He also sees room for a recovery during the second half of the year if energy prices ease, allowing the Federal Open Market Committee to adopt a less hawkish stance. Nevertheless, Hansen stressed that any sustained rebound will largely depend on technical price levels and the support levels at which investors are willing to re-enter the market.
The Impact of the Dollar and Bond Yields
Hansen emphasized that the pressure on gold has not been driven by a single catalyst. Instead, a combination of crowded long positioning and energy market developments has reshaped expectations for both the US dollar and interest rates, creating a challenging environment for the precious metal.
Correction or the Beginning of a Bear Market?
Concluding the interview, Hansen said the current decline still appears to be a normal—albeit deeper—correction following gold’s record highs, rather than the start of a prolonged structural bear market.
He added that a sustained bearish cycle would require persistently higher real yields, continued US dollar strength, weaker central bank demand, and ongoing outflows from exchange-traded funds (ETFs).
