Sive Morten
Special Consultant to the FPA
- Messages
- 22,091
FUNDAMENTALS
Gold now stands on a 2nd stage of media stream. Big political events, Central Banks meeting, statistics put gold on the back. In general it has shown more balanced reaction the Fed - drop was dampen by Iranian memorandum and technical oversold on the gold itself. Next week we will get the PCE numbers and M2 Supply data that will be very important. They should show how the US are following their strategy of "controlled devaluation". But as we said earlier - until real liquidity flows will reach markets and real rates will come on plateau gold remains under pressure.
MARKET OVERVIEW
Gold dropped, heading for a third weekly loss as traders weighed delays in negotiations over a permanent Middle East peace deal and the outlook for US interest rates. The US and Iran postponed the start of talks over a lasting deal and Tehran’s nuclear program after fighting intensified in southern Lebanon, a potential setback to efforts to end the war. Iran has closed the Straight again.
Inflation concerns haven’t completely subsided because it may take months, if not longer, for volumes of oil and liquefied natural gas going through the vital waterway to return to normal, according to analysts. Meanwhile, new Federal Reserve Chairman Kevin Warsh’s hawkish tone on inflation on Wednesday has also been weighing on bullion this week, as traders price in rate hikes that would create headwinds for gold as an asset that bears no interest.
In his inaugural press conference following his first policy meeting as Fed Chair, Kevin Warsh said he was launching five task forces to review how the central bank conducts its business in critical policy areas. Policymakers made several adjustments to the economic forecasts they issued in March, soon after the Middle East conflict began. Their median forecast for inflation this year jumped to 3.6% from 2.7%. Their forecast for 2026 core inflation, which excludes volatile food and energy categories, increased as well to 3.3% from 2.7%.
Nine of the U.S. central bank's 19 policymakers now think they will need to raise the Fed's policy rate this year, according to projections published on Wednesday, when the Fed's board decided to leave the rate in its current 3.50%-3.75% range. Traders currently see a 70% chance of a Fed hike by September, according to the CME FedWatch Tool and 85% in December.
Uncertainty remains over how quickly fuel prices can come down and when transits through the strait can return to pre-war levels. If energy costs stay elevated for an extended period of time, that may feed through to inflation data and the US central bank may still need to raise borrowing cost or at least keep higher rates for longer.
Goldman Sachs Group Inc. cut its year-end gold forecast by $500 an ounce as the Federal Reserve is no longer seen easing in 2026. The revised target of $4,900 an ounce for December implies bullion is still expected to gain ground in the second half, although less than previously expected, analysts Lina Thomas and Daan Struyven said in a note.
The Wall Street titan has been one of the most consistently bullish and high-profile voices on bullion in recent years, and the tweaked target represents a slight shift in tone. The cut to the outlook was driven by a lower forecast for inflows into gold-backed exchange-traded funds after the bank’s economists pushed back expectations for US rate cuts to June and December of next year, the analysts said. Previously, reductions were seen in December 2026 and March 2027.
In addition, concerns over central bank independence may be limited given the “surprisingly hawkish” first Fed meeting under Warsh’s leadership, they added. Warsh was appointed by President Donald Trump, who elevated him after repeatedly lashing out at his predecessor for not slashing rates enough.
Some Goldman executives have already flagged that possibility. The Fed may need to raise rates as soon as September if inflation remains elevated, Rob Kaplan, vice chairman at Goldman Sachs and former Dallas Fed president, said in an interview with Bloomberg Television this week. Still, some supportive factors for gold remained, including central-bank purchases, the analysts added. Official sector purchases were seen at 50 tons a month this year and 40 tons a month next year, they said.
More central banks than ever expect to increase their gold reserves, a sign one of the key forces behind bullion’s record-breaking rally remains intact despite this year’s pullback. In a survey of 74 central banks, 45% said they plan to buy in the coming year, the biggest-ever share in data collected by the World Gold Council and YouGov Plc since 2018. Just one said it planned to cut holdings, the WGC said in a report Tuesday.
In the coming year, emerging-market and developing-economy central banks make up most of the prospective buyers, according to the WGC’s survey. About 53% of those respondents said they expect their holdings to increase, compared with 18% of advanced-economy central banks. Half of the central banks planning to buy said they would fund purchases this way, while 38% said they would sell existing reserve assets. 9% said they had stored more within their own borders over the past year and 10% moved to diversify their holdings across different locations, up from 5% and 2%, respectively, in last year’s survey.
Managed short positions on COMEX gold were at the lowest since January 2025 in the week to June 2, leaving plenty of scope for bearish bets to build up. Standard Chartered analyst Suki Cooper estimates that at least 270 tons of gold in exchange-traded funds are in loss-making territory at prices below $4,250. At $4,000, that number will rise to 298 tons. Outflows from gold-backed ETFs totalled 16 tons in May and 7 tons in the first week of June. Nicky Shiels, head of metals strategy at MKS PAMP, expects gold prices to be rangebound over the next few months "before more strategic tailwinds and catalysts emerge".
MARKET COMMENTS
In general, the tendency that we were preparing to now is slowly spinning up. Global investors are actively reducing their investments in gold, according to data from EPFR. In the past week alone, the net outflow of funds from "gold" exchange-traded funds amounted to $2.3 billion. The price of gold fell below the level of $4,100 per troy ounce for the first time in six months, losing 10.5% in less than a month. The main reasons are the expectation of a Fed rate hike amid strong macroeconomic data and accelerating commodity inflation.
For the fourth consecutive week, international investors are reducing their investments in gold. This is evidenced by data from Emerging Portfolio Fund Research (EPFR). According to Bank of America (which takes into account EPFR data), the total amount of funds withdrawn from gold funds in the week ending June 10 amounted to $2.3 billion. This is almost a quarter less than the losses a week earlier. Over four weeks of continuous outflows, the funds' losses amounted to $7.5 billion.
The decline in international investors' interest in gold is also indicated by Bloomberg's information. According to the agency's latest available data, the total assets of gold exchange-traded funds fell by 6.8 tons to 3027.58 tons on Friday, June 12. Over the week, assets decreased by 26.8 tons, and over four weeks by almost 45 tons, which was the strongest drop in the indicator since March 2026.
Investors are starting to say that "there's something wrong with gold": since 2025, it has increasingly behaved like a defensive asset and less like a speculative meme stock. Despite the war in the Middle East and general instability, gold has not risen, but rather has corrected sharply. Moreover, the market has started to react to news "in the opposite way": when the conflict escalates, gold falls, and when there are signs of de-escalation, it rises. This behavior is more typical of risk-on assets than of a defensive instrument. Against this backdrop, a number of major investors are reducing their positions in gold and gold miners, shifting to other sectors.
The reasons for this transformation are complex. Firstly, gold has become much more sensitive to rates and inflation expectations. Secondly, rising energy prices are increasing the costs of gold mining companies. Thirdly, there are sales from central banks (for example, Turkey)or decreasing of purchases. Finally, the influence of speculative capital and complex market structures - from ETFs to derivatives and HFT - has intensified.
As a result, gold is increasingly being used not as a long-term defensive asset, but as a short-term bet on macro dynamics, primarily on interest rates. ETF flows have weakened, and the positioning of speculators has become noticeably more "bearish". Paradoxically, this could create the basis for a turnaround. According to Goldman Sachs, the market is currently heavily "shorted" on gold, and sentiment is one of the most negative in years. If the geopolitical situation nevertheless stabilizes or a new trigger appears, this could lead to a sharp rebound.
This is exactly represent the background that we explained. People do not understand that this is just because of liquidity demand. Gold moves like risky assets not because it is becoming the one but because the free cash flows depend on motion of risky assets. That's why gold just reflects it. Once the US will turn back to active QE-kind policy, starting pumping Bitcoin bubble and this should happen within a 6-8 months, situation will stabilize. This is not the change of the feature and quality of the gold. It trades for cash, so it also depends on their free amount. That's why when stocks drop on a new escalation - they need cash to add margin. Hence gold also drops as it is used for cash extraction by selling it. And vice versa. When amount of cash will increase and volatility drop - this effect will be over.
Despite, that Central Banks activity maybe decreased a bit, but it is spinning up now, when gold is challenging 4K level. 45% of central banks said they plan to buy gold over the next 12 months, the highest reading on record, according to the World Gold Council survey of 74 central banks.This percentage has more than doubled since 2020 and marks the 3rd consecutive annual increase.Emerging market and developing economy central banks led the increase, with a record ~53% of this group planning to add gold, up from 48% last year. Overall, 89% of central banks expect global gold reserves to increase over the next 12 months, the 2nd-highest reading on record.Central banks are buying the gold dip.
The WGC's materials also note a significant increase in skepticism towards the dollar. "Most respondents (74%) expect a moderate or significant decrease in the share of the US dollar in global reserves over the next five years," the report emphasizes. According to market participants, the shares of the euro and yuan will remain unchanged, while gold's position will strengthen. Central banks have started to actively withdraw their gold reserves from New York and London vaults. According to the World Gold Council (WGC), 9% of the surveyed central banks stated that they have increased the volume of gold storage within their own countries over the past 12 months. Last year, this figure was only 5%.
It means that Central Banks policy has not changed. As we told previously they knew where everything is coming and started gold accumulation in 2008 when nobody even thought about it. The pace of purchases can't be stable, it is normal. But as they keep buying it, suggesting decreasing of the USD share in reserves and increase pace or repatriation of national gold reserves back in domestic vaults - this just confirms that we do not mistake and global economy fragmentation continues.
Concerning of this story around Iran etc., one thing can be said for sure - regardless of the development of future events, the Persian Gulf, in terms of future investments and cooperation on oil, LNG, etc., will never be the same again. Force majeure stipulated in supply contracts will now be perceived not as something unlikely, but as inevitable, the only question is when. We will now be watching with interest to see what the increased money supply around the world over the past three months will lead to in the financial markets.
Slowdown of global economy is becoming more evident. EU is already hard breathing with GDP under 0.5% and forecasts of 0.1-0.3% and total destruction of auto and chemical industry. US is still stands on the surface but their economy consists of service sector for 70%, mixed with AI investing boom and bubble on the stock market. But it is also in China. China's retail sales fell by -0.6% year-on-year in May. Yes the one-month data is not a representative factor yet, but it lags behind production. investment in fixed assets decreased by -4.1% year-on-year in the first 5 months of 2026. Real estate investment led the decline, plummeting by -16.2% year-on-year compared to a -13.7% year-on-year drop in the period from January to April.
This is long process and we should not expect big fruits from it. But it is underway and the result will be the only one - low rates. Inflation could vary in different countries, depending of government stimulus. Say, in EU it might be lower, where they could stay on a classic recession stage with economy contraction and low rates, while the US, as we suggest will go differently, trying to avoid natural economy contraction via recession, they will try to " tight" it with high inflation by cutting rates and printing money. This will be made to devaluate stock bubble without nominal crash, put it in sideways for long term with currency devaluation. But all these measures will mean the same thing - lower real rates. Now matter either with recession type zero rates and low inflation or stagflation type - average rates and high inflation. This is what we're waiting for to start second stage of investing in gold.
Gold now stands on a 2nd stage of media stream. Big political events, Central Banks meeting, statistics put gold on the back. In general it has shown more balanced reaction the Fed - drop was dampen by Iranian memorandum and technical oversold on the gold itself. Next week we will get the PCE numbers and M2 Supply data that will be very important. They should show how the US are following their strategy of "controlled devaluation". But as we said earlier - until real liquidity flows will reach markets and real rates will come on plateau gold remains under pressure.
MARKET OVERVIEW
Gold dropped, heading for a third weekly loss as traders weighed delays in negotiations over a permanent Middle East peace deal and the outlook for US interest rates. The US and Iran postponed the start of talks over a lasting deal and Tehran’s nuclear program after fighting intensified in southern Lebanon, a potential setback to efforts to end the war. Iran has closed the Straight again.
Inflation concerns haven’t completely subsided because it may take months, if not longer, for volumes of oil and liquefied natural gas going through the vital waterway to return to normal, according to analysts. Meanwhile, new Federal Reserve Chairman Kevin Warsh’s hawkish tone on inflation on Wednesday has also been weighing on bullion this week, as traders price in rate hikes that would create headwinds for gold as an asset that bears no interest.
In his inaugural press conference following his first policy meeting as Fed Chair, Kevin Warsh said he was launching five task forces to review how the central bank conducts its business in critical policy areas. Policymakers made several adjustments to the economic forecasts they issued in March, soon after the Middle East conflict began. Their median forecast for inflation this year jumped to 3.6% from 2.7%. Their forecast for 2026 core inflation, which excludes volatile food and energy categories, increased as well to 3.3% from 2.7%.
Nine of the U.S. central bank's 19 policymakers now think they will need to raise the Fed's policy rate this year, according to projections published on Wednesday, when the Fed's board decided to leave the rate in its current 3.50%-3.75% range. Traders currently see a 70% chance of a Fed hike by September, according to the CME FedWatch Tool and 85% in December.
Uncertainty remains over how quickly fuel prices can come down and when transits through the strait can return to pre-war levels. If energy costs stay elevated for an extended period of time, that may feed through to inflation data and the US central bank may still need to raise borrowing cost or at least keep higher rates for longer.
Goldman Sachs Group Inc. cut its year-end gold forecast by $500 an ounce as the Federal Reserve is no longer seen easing in 2026. The revised target of $4,900 an ounce for December implies bullion is still expected to gain ground in the second half, although less than previously expected, analysts Lina Thomas and Daan Struyven said in a note.
The Wall Street titan has been one of the most consistently bullish and high-profile voices on bullion in recent years, and the tweaked target represents a slight shift in tone. The cut to the outlook was driven by a lower forecast for inflows into gold-backed exchange-traded funds after the bank’s economists pushed back expectations for US rate cuts to June and December of next year, the analysts said. Previously, reductions were seen in December 2026 and March 2027.
In addition, concerns over central bank independence may be limited given the “surprisingly hawkish” first Fed meeting under Warsh’s leadership, they added. Warsh was appointed by President Donald Trump, who elevated him after repeatedly lashing out at his predecessor for not slashing rates enough.
Some Goldman executives have already flagged that possibility. The Fed may need to raise rates as soon as September if inflation remains elevated, Rob Kaplan, vice chairman at Goldman Sachs and former Dallas Fed president, said in an interview with Bloomberg Television this week. Still, some supportive factors for gold remained, including central-bank purchases, the analysts added. Official sector purchases were seen at 50 tons a month this year and 40 tons a month next year, they said.
More central banks than ever expect to increase their gold reserves, a sign one of the key forces behind bullion’s record-breaking rally remains intact despite this year’s pullback. In a survey of 74 central banks, 45% said they plan to buy in the coming year, the biggest-ever share in data collected by the World Gold Council and YouGov Plc since 2018. Just one said it planned to cut holdings, the WGC said in a report Tuesday.
In the coming year, emerging-market and developing-economy central banks make up most of the prospective buyers, according to the WGC’s survey. About 53% of those respondents said they expect their holdings to increase, compared with 18% of advanced-economy central banks. Half of the central banks planning to buy said they would fund purchases this way, while 38% said they would sell existing reserve assets. 9% said they had stored more within their own borders over the past year and 10% moved to diversify their holdings across different locations, up from 5% and 2%, respectively, in last year’s survey.
Managed short positions on COMEX gold were at the lowest since January 2025 in the week to June 2, leaving plenty of scope for bearish bets to build up. Standard Chartered analyst Suki Cooper estimates that at least 270 tons of gold in exchange-traded funds are in loss-making territory at prices below $4,250. At $4,000, that number will rise to 298 tons. Outflows from gold-backed ETFs totalled 16 tons in May and 7 tons in the first week of June. Nicky Shiels, head of metals strategy at MKS PAMP, expects gold prices to be rangebound over the next few months "before more strategic tailwinds and catalysts emerge".
MARKET COMMENTS
In general, the tendency that we were preparing to now is slowly spinning up. Global investors are actively reducing their investments in gold, according to data from EPFR. In the past week alone, the net outflow of funds from "gold" exchange-traded funds amounted to $2.3 billion. The price of gold fell below the level of $4,100 per troy ounce for the first time in six months, losing 10.5% in less than a month. The main reasons are the expectation of a Fed rate hike amid strong macroeconomic data and accelerating commodity inflation.
For the fourth consecutive week, international investors are reducing their investments in gold. This is evidenced by data from Emerging Portfolio Fund Research (EPFR). According to Bank of America (which takes into account EPFR data), the total amount of funds withdrawn from gold funds in the week ending June 10 amounted to $2.3 billion. This is almost a quarter less than the losses a week earlier. Over four weeks of continuous outflows, the funds' losses amounted to $7.5 billion.
The decline in international investors' interest in gold is also indicated by Bloomberg's information. According to the agency's latest available data, the total assets of gold exchange-traded funds fell by 6.8 tons to 3027.58 tons on Friday, June 12. Over the week, assets decreased by 26.8 tons, and over four weeks by almost 45 tons, which was the strongest drop in the indicator since March 2026.
Investors are starting to say that "there's something wrong with gold": since 2025, it has increasingly behaved like a defensive asset and less like a speculative meme stock. Despite the war in the Middle East and general instability, gold has not risen, but rather has corrected sharply. Moreover, the market has started to react to news "in the opposite way": when the conflict escalates, gold falls, and when there are signs of de-escalation, it rises. This behavior is more typical of risk-on assets than of a defensive instrument. Against this backdrop, a number of major investors are reducing their positions in gold and gold miners, shifting to other sectors.
The reasons for this transformation are complex. Firstly, gold has become much more sensitive to rates and inflation expectations. Secondly, rising energy prices are increasing the costs of gold mining companies. Thirdly, there are sales from central banks (for example, Turkey)or decreasing of purchases. Finally, the influence of speculative capital and complex market structures - from ETFs to derivatives and HFT - has intensified.
As a result, gold is increasingly being used not as a long-term defensive asset, but as a short-term bet on macro dynamics, primarily on interest rates. ETF flows have weakened, and the positioning of speculators has become noticeably more "bearish". Paradoxically, this could create the basis for a turnaround. According to Goldman Sachs, the market is currently heavily "shorted" on gold, and sentiment is one of the most negative in years. If the geopolitical situation nevertheless stabilizes or a new trigger appears, this could lead to a sharp rebound.
This is exactly represent the background that we explained. People do not understand that this is just because of liquidity demand. Gold moves like risky assets not because it is becoming the one but because the free cash flows depend on motion of risky assets. That's why gold just reflects it. Once the US will turn back to active QE-kind policy, starting pumping Bitcoin bubble and this should happen within a 6-8 months, situation will stabilize. This is not the change of the feature and quality of the gold. It trades for cash, so it also depends on their free amount. That's why when stocks drop on a new escalation - they need cash to add margin. Hence gold also drops as it is used for cash extraction by selling it. And vice versa. When amount of cash will increase and volatility drop - this effect will be over.
Despite, that Central Banks activity maybe decreased a bit, but it is spinning up now, when gold is challenging 4K level. 45% of central banks said they plan to buy gold over the next 12 months, the highest reading on record, according to the World Gold Council survey of 74 central banks.This percentage has more than doubled since 2020 and marks the 3rd consecutive annual increase.Emerging market and developing economy central banks led the increase, with a record ~53% of this group planning to add gold, up from 48% last year. Overall, 89% of central banks expect global gold reserves to increase over the next 12 months, the 2nd-highest reading on record.Central banks are buying the gold dip.
The WGC's materials also note a significant increase in skepticism towards the dollar. "Most respondents (74%) expect a moderate or significant decrease in the share of the US dollar in global reserves over the next five years," the report emphasizes. According to market participants, the shares of the euro and yuan will remain unchanged, while gold's position will strengthen. Central banks have started to actively withdraw their gold reserves from New York and London vaults. According to the World Gold Council (WGC), 9% of the surveyed central banks stated that they have increased the volume of gold storage within their own countries over the past 12 months. Last year, this figure was only 5%.
It means that Central Banks policy has not changed. As we told previously they knew where everything is coming and started gold accumulation in 2008 when nobody even thought about it. The pace of purchases can't be stable, it is normal. But as they keep buying it, suggesting decreasing of the USD share in reserves and increase pace or repatriation of national gold reserves back in domestic vaults - this just confirms that we do not mistake and global economy fragmentation continues.
Concerning of this story around Iran etc., one thing can be said for sure - regardless of the development of future events, the Persian Gulf, in terms of future investments and cooperation on oil, LNG, etc., will never be the same again. Force majeure stipulated in supply contracts will now be perceived not as something unlikely, but as inevitable, the only question is when. We will now be watching with interest to see what the increased money supply around the world over the past three months will lead to in the financial markets.
Slowdown of global economy is becoming more evident. EU is already hard breathing with GDP under 0.5% and forecasts of 0.1-0.3% and total destruction of auto and chemical industry. US is still stands on the surface but their economy consists of service sector for 70%, mixed with AI investing boom and bubble on the stock market. But it is also in China. China's retail sales fell by -0.6% year-on-year in May. Yes the one-month data is not a representative factor yet, but it lags behind production. investment in fixed assets decreased by -4.1% year-on-year in the first 5 months of 2026. Real estate investment led the decline, plummeting by -16.2% year-on-year compared to a -13.7% year-on-year drop in the period from January to April.
This is long process and we should not expect big fruits from it. But it is underway and the result will be the only one - low rates. Inflation could vary in different countries, depending of government stimulus. Say, in EU it might be lower, where they could stay on a classic recession stage with economy contraction and low rates, while the US, as we suggest will go differently, trying to avoid natural economy contraction via recession, they will try to " tight" it with high inflation by cutting rates and printing money. This will be made to devaluate stock bubble without nominal crash, put it in sideways for long term with currency devaluation. But all these measures will mean the same thing - lower real rates. Now matter either with recession type zero rates and low inflation or stagflation type - average rates and high inflation. This is what we're waiting for to start second stage of investing in gold.
