Gold Has Returned Above USD 4,000, but in the Long Term, the Precious Metal Needs Further Alignment Between Capital Flows and Interest Rates

(MENAFN- MENAFNEditorial) 
Written by Linh Tran, Market Analyst at XS

Gold has declined nearly 6.5% since the beginning of the year and lost nearly 28% from the peak established in mid-February, showing that the precious metal has faced significant pressure from the high interest rate environment and investor caution during this period.
Rising energy prices and persistent inflation have shifted monetary policy expectations toward further tightening, increasing the opportunity cost of holding non-yielding assets, including gold. During this period, demand for risk protection has remained present but has not gained the upper hand, so prices have continued to slide.
After falling to a low around USD 3,870 per ounce, gold recently recovered above USD 4,000. A weaker USD and easing US Treasury yields contributed to this recovery. But reclaiming an important psychological level only helps reduce immediate pressure. Whether prices can remain above this area is what plays an important role in the recovery outlook.
Personally, I believe t’at gold’s long-term foundations have not completely disappeared. It is just necessary to distinguish between factors that help maintain demand for holding gold and drivers strong enough to push prices higher.
Central banks:
According to the World Gold Council, central banks purchased approximately 321 tonnes of gold on a net basis in Q3 2026, up 42% from the same period last year, bringing total purchases over nine months to 675 tonnes.
It can be seen that demand for accumulation has been maintained despite high gold prices. But the aggregate data also include estimates for transactions that have not been disclosed, so this cannot yet be used to make overly firm claims about the possibility of price increases.
The precious metal plays an important role in reserve portfolios when countries want to reduce their dependence on a group of assets or a currency, such as the USD. The World Gold Council’s 2026 survey shows that 45% of participating central banks expect to increase their gold reserves over the next 12 months. Although this does not mean actual transactions, it still shows that gold continues to receive strategic interest.
ETF:
In the past third quarter, global gold ETFs attracted approximately USD 31 billion, adding 211 tonnes of gold and bringing total holdings to a record 4,256 tonnes. September alone recorded approximately USD 10 billion in inflows.
Gold holdings increased even as prices weakened. This means that some investors still maintain demand for long-term accumulation. But even positive capital flows have not been enough to cause prices to reverse or enter a new accumulation phase, showing that prices remain under pressure from other factors.
For gold to move further, in my view, the market needs a combination of continued ETF inflows and a decline in the opportunity cost of holding gold.
Downside risks:
High inflation does not automatically benefit gold when the accompanying response is tighter monetary policy. Demand for purchasing power protection can be outweighed by high yields and USD strength. Recoveries driven by expectations of monetary easing can also weaken easily if economic data do not confirm that change.
In the third quarter, global jewellery demand fell 17% from the same period last year, while demand for gold bars and coins declined 19%. Thus, despite the correction from the peak, prices remain high for many buyers. This weakness makes the market more dependent on central bank purchases and investment flows, while leaving it vulnerable to pressure if these sources of demand slow down.
Outlook:
To assess go’d’s upcoming trend, I view the area around USD 4,000 per ounce as a temporary balance between buying after the decline and the selling pressure that remains.
If investment flows and yield movements continue to provide support, gold could stabilise above USD 4,000, also opening up an opportunity for a recovery toward USD 4,200, followed by USD 4,400. The important condition is the ability to maintain the new price level through pullbacks, rather than only moving above it briefly.
Conversely, if gold fails to defend the psychological USD 4,000 level after it has been tested many times, I would lean toward the possibility that the correction is not yet over. A scenario in which prices fall back toward USD 3,600 needs to be considered before the market can form a new accumulation zone.
This is a conditional scenario, not a guaranteed bottom. The long-term outlook still has supportive factors, but a sustainable recovery needs to be confirmed by actual capital flows and reduced pressure from interest rates.

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