Lost the 4000 mark! Gold has fallen more than 12% this month; Goldman Sachs: The bull market isn’t over yet.

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Gold is set to post its largest single-month drop in over 17 years this month, but major Wall Street institutions are keeping their year-end high target prices unchanged.

Spot gold broke below the $4,000/oz mark intraday on Tuesday, hitting a low of $3,943—its lowest level since November—and dropping as much as 1.8% in a single day. So far this month, it has fallen about 12.4%. If this level is maintained through month-end, it will record the largest single-month drop since October 2008. Expectations of Fed rate hikes and a strong dollar have created a dual pressure, overwhelming traditional safe-haven and anti-inflation logic.

Despite gold's recent weakness, Goldman Sachs is still keeping its year-end target price at $4,900/oz. Samantha Dart, Co-Head of Commodities Research at Goldman Sachs, stated clearly in a report released last Sunday night: "The rally in gold is not over yet." The driving forces are continued reserve diversification by emerging market central banks and long-term concerns over Western fiscal sustainability.

The sharp fall in gold, combined with Goldman's strong backing, has sharply intensified market divergence. Investors are now focusing on U.S. June ADP and non-farm payroll data to be announced this week, in order to further gauge the Fed's policy direction.

Largest monthly drop since 2008, dismal quarterly performance as well

Spot gold fell 1% on Tuesday to $3,975.04/oz, August gold futures dropped 1.2% to $3,988.60/oz. Overall monthly decline is about 12.4%, and it has fallen for four consecutive months.

Looking further back, gold is also on track to record its largest quarterly drop since Q2 2013, ending the run of quarterly gains since 2024. Since peaking at historical highs at the end of January this year, gold has fallen over 6% year-to-date; since the outbreak of the Iran war in late February, the drop has reached about 25%, breaking through key technical support such as the 200-day moving average.

Other precious metals are also under pressure. Spot silver fell 1.6% to $57.35/oz, platinum dropped 0.5% to $1,566.90/oz, and palladium edged up 0.5% to $1,219.55/oz. All three are facing simultaneous monthly and quarterly declines, with silver facing its biggest one-month drop since September 2011, and platinum set for its worst month since 2008 and worst quarter since January 2020.

Fed rate hike expectations and strong dollar apply double pressure

The core logic of this round of gold's decline lies in inflation pressures fueling rate hike expectations by the Fed. After the outbreak of the Iran war, energy prices surged, reinforcing inflation stickiness and prompting continuous upward revisions to market pricing of the rate path.

CME FedWatch data shows traders are now expecting three Fed rate hikes this year, with the market assigning about a 64% probability to a September rate hike. "The market faces triple pressures: high inflation, high rate expectations, and a strong dollar. This is enough to suppress all bullish factors that typically drive gold higher," said Marex analyst Edward Meir.

Although gold is traditionally viewed as an inflation hedge, in a high-rate environment, its appeal as a non-interest-bearing asset drops significantly. Meanwhile, the dollar has appreciated over 2% so far this month, poised for its second consecutive month of gains, making dollar-denominated gold increasingly expensive for holders of other currencies.

On the technical front, Vantage Markets Melbourne analyst Hebe Chen noted that after gold prices broke key recent support, sell pressure has clearly accelerated, and initial profit-taking has turned into a deeper breakdown of short-term momentum.

Goldman Sachs maintains $4,900 target anchored to structural central bank demand

Goldman noted in its report that gold has risen 123% since 2022 and stressed that the structural upward logic remains unchanged.

"Structurally, reserve diversification by emerging market central banks—which stemmed from the freezing of Russia’s reserves in 2022—remains the chief anchor for our $4,900/oz year-end target," wrote Samantha Dart in the report.

A recent World Gold Council survey conducted between February and May this year among 76 central banks showed that, for the first time on record, as many as 45% of respondents expect to increase their gold reserves in the next 12 months.

On the cyclical front, Goldman acknowledges that short-term headwinds are objectively present—"the Fed’s hawkish stance is curbing the currency depreciation narrative"—but its economists’ baseline forecast is that the Fed will keep rates unchanged this year, with the easing cycle postponed until the second half of next year. Therefore, Goldman expects ETF holdings to gradually rebound, serving as a buffer to cyclical downward pressures. Dart also noted that mid-term, macro issues such as concerns about the sustainability of Western fiscal policy will eventually accelerate private capital diversification into gold, keeping the risks to the price forecast skewed to the upside.

Three conditions needed for rebound, analysts warn of prolonged consolidation

The market has clear prerequisites as to when bulls can regain control. OCBC precious metals strategist Christopher Wong stated in his report:

"Gold bulls need at least one of the following three conditions to improve: lower real yields, a weaker dollar, or a clear reversal in Fed hawkish expectations. Otherwise, any rebound may be digested one by one, and gold prices may continue to consolidate below previous highs for a long period."

The U.S. Supreme Court's ruling this week has also attracted market attention—the court decided that Fed Governor Lisa Cook can remain in her position during litigation protesting Trump’s attempt to remove her on unsubstantiated mortgage fraud allegations. This decision strengthens the Fed’s independence, allowing it to stick to data-driven policy decisions amid external pressure. The latest inflation data released last week remains high, but was within analysts’ expected range.

Investors are now awaiting U.S. June ADP and non-farm payroll reports to be released later this week, to further assess how labor market resilience might influence the Fed’s policy path—these two sets of data will be key litmus tests for gold’s short-term trajectory.

Risk warning and disclaimerThe market involves risks, and investments should be made cautiously. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of any individual user. Users should consider whether any opinions, viewpoints, or conclusions contained herein fit their specific circumstances. Investing based on this information is at your own risk. ```