Behind Gold's Plunge: How Oil, Rates, and the Dollar's "Triple Headwinds" Strangle Gold Prices?
— Gold's Three Failed Attempts at $4,100 Leave H2 Outlook Shrouded in Fog
On July 24, 2026, the US initial jobless claims plummeted to 187,000, the lowest since 1969. Like an earthquake in financial markets, alongside Brent crude futures breaking the $100 per barrel mark, both forces pointed in one direction: the Fed's rate hike expectations were quickly being confirmed. Spot gold fell below $4,050/oz, after having just experienced a sharp drop from the $4,141/oz high the previous day, losing more than $90 in 12 hours. This marked the third time in the past month that gold failed to break through the $4,100/oz level.
Introduction: A Short-Lived "Rebound" Under Triple Pressures
What drives short-term gold price movements? Is there room for upside in H2? What uncertainties lie beneath? The answers may be found in the interplay of three "turbulences": surging oil, rising rates, and a strong USD. The recent sharp rally and sell-off appears to be an interaction of geopolitics and macro data, but in essence it's a deep contest of risk appetite and capital flows.
1. Oil: The Biggest Suppressive Force on Gold
The rebound came fast and went faster. On July 21, gold briefly fell below $4,000 during the session, hitting a low of $3,999.68 before quickly rebounding. On July 22, both spot gold and COMEX gold broke above $4,140, sending bullish sentiment soaring. But the bulls' party lasted less than 48 hours.
On July 23, Yemen's Houthi rebels attacked two Saudi oil tankers in the Red Sea, opening a new front in the Middle East conflict. US President Trump immediately issued a stern threat: if the Houthis attack Saudi vessels again, the US will hold Iran responsible and impose "major military punishment" on Iran and the Houthis. Geopolitical risks surged, and the Brent crude oil futures September contract settlement price jumped more than 7% to close at $100.69/barrel, the first time above $100 since May. At the same time, gold plunged about 2%.
US Gold Exchange analyst Jim Wyckoff's comment hit the core: "Higher oil prices push up bond yields, and rising yields are the enemy of gold bulls." The negative correlation between oil and gold was fully displayed.
Note: On July 23, the Brent crude oil futures September contract settlement price closed at $100.69/barrel, the first close above $100 since May; spot gold fell in tandem, closing down 1.96% at $4,049.48/oz.
Chart: Overlay of ICE Brent crude futures (September contract, BRNU26) and London spot gold prices, July 20-24, 2026 (Source: Wind)
2. Triple Headwinds in Concert: Oil, Rates, and USD Jointly Suppress Gold
Behind gold's drop from $4,141 to $4,050 is the combined suppression of three forces.
1. Oil: Catalyst of Geopolitical Conflict
US-Iran conflict continues to escalate. The Trump administration intensified war threats against Iran, vowing that "if Iran attacks a single vessel in the Strait of Hormuz, the US will bomb and destroy an Iranian bridge or power plant." Iran retaliated by threatening to strike all US-linked infrastructure in the region. The situation is sliding toward greater danger, and the panic in the oil market directly transmits to risk asset pricing.
2. Interest Rates: Full Pricing of Rate Hike Expectations
Surging oil prices quickly transmitted to the rates market. The benchmark 10-year US Treasury yield rose to around 4.71%, a new high since January 2025. Data from the Chicago Mercantile Exchange showed that the probability of a rate hike at the Fed's September policy meeting had risen to about 82%, up from less than 53% a week earlier. Swap traders expected a rate hike probability of around 34% to 38% at the upcoming July meeting. The market has moved from "discussing rate hikes" to "pricing in rate hikes."
3. US Dollar: Safe-Haven Inflows
Geopolitical uncertainty and rate hike expectations prompted capital inflows into the USD as a safe haven. The dollar index traded around the 101 level, further suppressing dollar-denominated gold.
Chaos Tiancheng Futures pointed out that after a period of desensitization, precious metals were again suppressed by high oil prices, US Treasury yields, and the dollar index, leading to a sharp retreat. CICC Wealth Futures stated bluntly: "Escalating US-Iran conflict and soaring oil prices have dealt a heavy blow to gold that had just begun to rebound. The biggest risk for the gold market now is oil prices spiraling out of control."
Note: Gold prices have continued to retreat from late January's historical peak, and three attempts to break $4,100 in late July all failed.
Chart: Spot gold price trend from January to July 2026 (Source: Wind)
3. "False Rebound" or "True Reversal"? Market Deeply Divided
Market participants are deeply divided on the nature of this rebound.
1. Bearish Camp: False Rebound, Risks Remain
In a July 24 research report, Sinolink Securities gave a clear judgment that this may be a "false rebound." The report stated that gold's rebound since July has been more a result of fund rotation out of tech stocks than the start of a new trend. A true reversal requires three conditions: renewed AI bubble concerns, restart of rate cut expectations, and increased USD credit worries, none of which are present. The firm believes gold will likely experience choppy recovery in H2, with allocation value on the downside and event catalysts needed on the upside, targeting a range of $4,300 to $4,500 by year-end.
UBS also expressed caution. The bank noted that gold has been consolidating near $4,100, with escalating US-Iran tensions continuing to weigh on gold. While central bank gold purchases are encouraging, they have not pushed prices higher. UBS maintained its gold price targets for September 2026, December 2026, March 2027, and June 2027 at $4,400, $4,600, $5,000, and $5,200, respectively.
2. Bullish Camp: Long-Term Buyers Poised to Act
HSBC was relatively optimistic, noting that the Shanghai Gold Exchange premium recovery indicates physical demand is warming, and the market has largely priced in rate hike expectations. Some analysts believe that this pullback has not altered the overall technical picture of gold, with prices still showing signs of bottoming above the late-June low of $3,942.
4. Long-Term Buyers Are Building an Invisible Floor
Beneath the short-term noise, long-term money is quietly positioning.
Central Banks Active
The People's Bank of China's gold reserves at end-June stood at 75.44 million ounces, an increase of 480,000 ounces from end-May, the largest monthly increase since November 2024. This marks the 20th consecutive month of gold accumulation by the PBOC. Since the start of 2026, the pace has intensified: a 30,000-ounce increase in February, 160,000 in March, 260,000 in April, 320,000 in May, and 480,000 in June. The pattern of increasing allocation during price pullbacks is clear.
The National Bank of Poland has purchased 82 tons of gold this year, followed by central banks of Uzbekistan, Kazakhstan, Czech Republic, UAE, Singapore, and others.
ETF Holdings Gradually Returning
Subtle changes are also occurring at the ETF level. Holdings of the world's largest gold ETF, SPDR Gold Trust, have seen inflows for four consecutive days, rising from 999 tons on July 17 to 1,009.3 tons on July 23, a cumulative increase of over 10 tons. While still small compared to June's net outflow of nearly 74 tons, the consecutive inflow days suggest that some long-term money is gradually positioning into the pullback.
These long-term allocation activities form an invisible but solid floor beneath gold prices.
Conclusion: A H2 of Both Risks and Opportunities
Overall, the gold market is at the intersection of multiple pressures. Surging oil, rising Fed rate hike expectations, and a strong USD collectively form the main forces suppressing gold in the near term. However, continued central bank purchases and long-term ETF buying on dips provide a floor of support.
For investors, near-term focus should be on the evolution of US-Iran conflict, the Fed's policy path, and inflation data. If geopolitical risks escalate further and oil prices run out of control, gold may face deeper corrections. Conversely, if these headwinds are gradually absorbed, the accumulation of long-term buying could fuel the next rebound.
The gold market in H2 is destined to continue its story amid a mix of risks and opportunities.
