Gold claws back above $4,000 after worst selloff since January record high

Gold clawed back above the $4,000 level on Friday after briefly finding support near $3,960 earlier in the week, but analysts see the bounce as a relief rally within a broader downtrend driven by a hawkish Federal Reserve and a resurgent U.S. dollar.

A Steep Fall From Record Heights

The metal traded around $4,015 on Friday after dropping below $4,000 on Wednesday for the first time since November 2025, according to Bloomberg. The breach of that level marked a dramatic reversal from January 28, when gold hit a record high of $5,594.82, according to Reuters. That peak was fueled by the U.S.-Iran conflict, a weakening dollar, and expectations of further Federal Reserve rate cuts.bloomberg+1

Since then, gold has shed roughly 28% from its January highs, erasing all of its 2026 gains. The selloff accelerated after new Fed Chairman Kevin Warsh held rates steady at his inaugural press conference on June 17 while emphasizing the central bank's commitment to fighting inflation, which markets interpreted as a signal that rate hikes remain on the table.npr+3

Dollar Strength and Vanishing Tailwinds

The U.S. dollar index hit a 13-month high of 101.80 on Wednesday, driven by a sharp repricing of rate expectations following the Fed meeting, according to CNBC. Traders now see roughly an 87% chance of a rate hike by December, up from 61% before the decision. The strong dollar has pressured non-yielding assets like gold across the board.cnbc+1

The unwinding of the Middle East war premium has also removed a key pillar of support. Following the signing of an interim peace agreement between the U.S. and Iran, vessels began exiting the Strait of Hormuz, easing energy supply fears. Ole Hansen, head of commodity strategy at Saxo Bank, noted that "the interplay of elevated bond yields, a stronger dollar, and the anticipation that policy rates may stay high for an extended period continues to dampen investor interest in non-yielding assets".finance.yahoo+1

Goldman Sachs Cuts Target

Goldman Sachs cut its year-end 2026 gold forecast by $500 to $4,900 per ounce, citing the removal of all 2026 rate cuts from its outlook and slower inflows into gold-backed ETFs. Analysts Lina Thomas and Daan Struyven warned that in the event of an actual rate hike, their target could fall another $500 to $4,400.canadianminingjournal+1

Macquarie still forecasts an average gold price of $4,641 for 2026 but expects prices to decline to $4,200 next year. For now, Hansen cautioned that "a prolonged break beneath $4,000 could trigger a new wave of capitulation and momentum-driven selling".finance.yahoo+1