Gold returns above $4,000: How cooling rate hike expectations ignite precious metal rebound

On July 2, Beijing time, spot gold fluctuated higher during the Asian trading session, trading above $4,050, extending its technical rebound from the recent low zone. The precious metal had previously approached a seven-month low, but this week's rebound was primarily driven by a combination of macro policy expectations and geopolitical risk sentiment.

As of July 2, Beijing time, spot gold was reported at $4,069.66 per ounce, up 0.03% intraday. According to Gate market data, XAUT briefly touched $4,067.1 per ounce, with an intraday gain of 2.42%. From the chart perspective, gold fell to $3,959.64 on Wednesday but closed firmly above $4,000, indicating concentrated buying support near this psychological level.

Gold's rebound reflects a repricing of the market's expectations for the Federal Reserve's interest rate path. After a historic surge earlier this year followed by a deep pullback, the tug-of-war around the $4,000 level has become a key anchor for determining the medium-term direction of the precious metal.

Fed Dovish Signals: The Immediate Catalyst for Gold's Rebound

The core factor driving gold back above $4,000 stems from a marginal shift in expectations for Federal Reserve policy.

Federal Reserve Chairman Kevin Warsh said Wednesday at the European Central Bank's annual central banking forum in Sintra, Portugal, that inflation expectations and upside risks to inflation have declined in recent weeks. He also stressed that the Fed does not provide forward guidance and will base policy decisions on the latest economic data. This statement was generally neutral to mildly dovish, interpreted by the market as indicating a limited probability of a rate hike in the near term, thereby weakening bets on a further tightening path.

For gold, the repricing of the interest rate path is a core variable. Higher borrowing costs typically weigh on non-yielding assets like gold, and Warsh's failure to reinforce rate hike expectations provided short-term support for the precious metals market. Following Warsh's comments, short-term U.S. Treasury yields briefly declined, and the dollar's rally slowed, directly reducing the opportunity cost of holding gold.

Market expectations quickly adjusted accordingly. According to the CME FedWatch Tool, traders' probability of a September rate hike fell from 80% on Tuesday to 65%. This decline itself constitutes a significant positive for gold—weakened rate hike expectations imply a marginal reduction in the holding cost of a non-yielding asset.

Meanwhile, U.S. economic data also provided fundamental support for gold's rebound. The U.S. ADP National Employment Report for June showed the private sector added 98k jobs, below the consensus economist estimate of 118k. During the same period, the June ISM Manufacturing PMI came in at 53.3, lower than the market expectation of 54.0 and the May prior reading of 54.0. Both data points fell short of expectations, further reinforcing market concerns about slowing U.S. economic momentum. Weak employment data boosted rate cut bets, pushing gold above $4,000.

Additionally, marginal changes in the geopolitical landscape are also affecting gold's safe-haven structure. Former U.S. President Trump stated that the U.S. and Iran have begun talks, leading to a phased cooling of the Middle East situation. U.S.-Iran negotiations, mediated by Qatar, have made some progress, with "positive developments" on certain issues. Although this progress marginally weakened gold's safe-haven premium, it did not reverse the overall rebound trend—changes in policy expectations were the dominant driver of this rally.

Are Rate Hike Expectations Overpriced?

As gold rebounds, the market is also asking another question: Has the current gold price near $4,000 already fully—or even excessively—priced in the Fed's rate hike expectations?

A recent research report from CICC indicates that based on a model measuring the interest rate expectations implied in gold prices, the current gold price around $4,000 per ounce has already fully priced in 3 to 4 rate hikes, a level significantly higher than what the current interest rate futures market prices for the future policy path. In other words, the gold market may have temporarily over-reflected the Fed's rate hike expectations.

CICC's macro team believes that employment and consumption pressures, along with the growing financing needs of the U.S. AI economy, may make it difficult for the Fed to turn truly hawkish, and monetary policy could be "hawkish in name but dovish in nature." If falling oil prices are further reflected in short-term U.S. inflation data, the gold market's pricing of rate hike expectations may be subject to correction.

This analytical framework provides an important observation perspective: The current pricing of gold already incorporates a relatively aggressive tightening path. If subsequent economic data or Fed statements confirm that this path is too aggressive, gold may face upside risk from expectation correction; conversely, if inflation data continues to surprise to the upside, forcing the Fed to actually raise rates, then the downside risk for gold will correspondingly increase.

Gold vs. Bitcoin: Which Is a Better Investment?

Against the backdrop of gold returning to the $4,000 level, investors will naturally turn their attention to another widely discussed "digital gold"—Bitcoin. Both are alternative assets to fiat currencies, but their performance in the first half of 2026 has shown significant divergence.

According to Gate market data, as of July 2, Beijing time, Bitcoin was quoted at approximately $59,763.7, with a change of +1.99% over the past 24 hours, but -7.63% over the past 7 days and -10.73% over the past 30 days. Although Bitcoin briefly recovered above $60,000 after Warsh's speech, its year-to-date cumulative decline has exceeded 30%. In comparison, while gold has fallen about 7% year-to-date, it remains among the best-performing assets over the past 12 months.

Behind this divergence lies the distinctly different asset attributes of the two. Gold, as a traditional safe-haven asset, has a store-of-value function verified over thousands of years and is deeply tied to global central bank reserve systems and physical demand. According to data from the World Gold Council, central bank gold purchases were steady in the first quarter, with the People's Bank of China accelerating its holdings for three consecutive months. The 2026 Central Bank Gold Reserve Survey showed that 89% of respondent central banks believe global gold reserves will increase in the coming year. This structural demand from sovereign institutions provides solid support for gold prices.

Bitcoin, on the other hand, exhibits characteristics more akin to a risk asset. In the first quarter of 2026, Bitcoin fell 20%, while gold remained relatively stable. Bitcoin's high correlation with tech stocks makes it more vulnerable during liquidity tightening cycles. Some analysts point out that Bitcoin's correlation with risk assets is a key challenge to its positioning as a "safe-haven asset."

From a portfolio perspective, gold and Bitcoin are not simple substitutes; they serve different functional roles. Gold is more suitable as a ballast against macro uncertainty and systemic risk, while Bitcoin's high volatility positions it closer to a high-risk, high-reward alternative asset allocation. For risk-averse investors, gold's allocation value near $4,000 is re-emerging; for investors able to tolerate high volatility, Bitcoin's rebound potential after a significant pullback is also worth noting.

Gold Outlook for H2 2026: Three Scenarios

Looking ahead to the second half of 2026, the World Gold Council, in its "Gold Mid-Year Outlook 2026" report released on July 1, presented three possible scenario forecasts.

Baseline Scenario: From current levels, gold prices are broadly in line with market consensus. The market expects the Fed to raise rates at least once in 2026, likely in October; the Bank of England, Bank of Japan, and European Central Bank are all expected to tighten monetary policy; U.S. inflation in Q2 is expected to peak near 3.9%. If there are no major changes in these underlying factors, gold is expected to trade around $4,100 per ounce for the year, with a fluctuation range of approximately ±5%.

Upside Scenario: If geopolitical or economic conditions deteriorate, or if there is a significant shift in interest rate expectations, gold prices could regain upward momentum and rise to $4,500 per ounce. The World Gold Council notes that financial market volatility and geopolitical risk typically have a positive impact on gold performance—historical data shows that for every 100-point increase in the Geopolitical Risk Index (GPR), gold prices typically rise by 2.5%. Only if signals of a global economic slowdown are strong enough could gold be pushed up to $5,000 per ounce.

Downside Risks: A stronger U.S. dollar, Fed rate hikes exceeding expectations, and a rebound in market risk appetite are the main obstacles to gold's upside. If gold prices consistently fall below the $4,000 level, it could trigger further selling. However, historically, if gold prices decline more than 10% from current levels, it could trigger "buy-the-dip" demand from long-term investors in multiple regions.

From a technical perspective, gold faces a resistance zone between $4,070 and $4,120 on the daily chart. Key short-term support levels are concentrated in the $3,980 and $3,920 areas; a break below these could retest the previous low zone. Resistance above is at $4,080 and $4,150. On the 4-hour chart, gold is showing a low-level rebound structure, with the MACD's bearish momentum bars shrinking, indicating weakening downward momentum but not yet a full shift to a bullish dominant structure.

Conclusion

Gold's return above $4,000 is the result of a convergence of three factors: a shift in Federal Reserve policy expectations, weakening U.S. economic data, and marginal changes in geopolitics. Warsh's dovish-leaning comments reduced the market's urgency regarding rate hikes, the weaker-than-expected ADP employment data reinforced this logic, and progress in U.S.-Iran talks marginally affected the distribution of safe-haven demand.

Looking ahead to the second half of the year, $4,000 has become a key bull-bear watershed for gold. The World Gold Council's three scenario projections indicate that gold's future direction will be highly dependent on the actual evolution of the interest rate path, geopolitical situations, and global economic momentum. For investors, understanding the pricing logic of gold in the current macro environment—rather than simply chasing price fluctuations—is the foundation for making rational allocation decisions.

Meanwhile, the divergence in performance between gold and Bitcoin in the first half of 2026 provides an important reference dimension for asset allocation. The fundamental differences between the two in terms of safe-haven properties, volatility characteristics, and market demand structures determine their irreplaceable roles in different macro scenarios. In a global macro environment of rising uncertainty, the positioning and value of these two assets will remain core topics for ongoing market discussion.

FAQ

Q1: Why did gold break through $4,000?

The immediate catalysts include dovish signals from Fed Chairman Warsh, which weakened market rate hike expectations, and the weaker-than-expected U.S. ADP employment data for June (adding 98k jobs, below the expected 118k), which boosted rate cut bets. Additionally, there was concentrated buying support near $4,000; gold quickly recovered this level after briefly falling to $3,959.64 on Wednesday.

Q2: How does a Fed rate hike affect gold?

A Fed rate hike raises real interest rates and the opportunity cost of holding gold, typically putting pressure on gold prices. Current gold prices near $4,000 have already priced in 3 to 4 rate hikes, potentially over-reflecting rate hike expectations. If subsequent data confirms that the rate hike path is not as aggressive as feared, gold could see upside from expectation correction.

Q3: Which is a better investment, gold or Bitcoin?

The two have different positioning. Gold is a traditional safe-haven asset, supported by global central bank reserves and physical demand, with relatively lower volatility. Bitcoin has fallen over 30% year-to-date in 2026 and is more correlated with risk assets. Gold is suitable as a macro hedge allocation, while Bitcoin is closer to a high-risk alternative asset. Investors should choose based on their own risk tolerance.

Q4: What is the forecast for gold in H2 2026?

The World Gold Council presents three scenarios: In the baseline scenario, gold trades around $4,100 (±5%); if geopolitical or economic conditions worsen, gold could rise to $4,500; if signals of a global economic slowdown are strong, it could reach $5,000. Downside risks come from a stronger dollar and higher-than-expected rate hikes.

Q5: What does the $4,000 level mean for gold?

$4,000 is a key psychological level and a bull-bear dividing line for gold. Gold briefly fell below this level on Wednesday but closed above it, indicating strong buying support. Short-term support is at $3,980 and $3,920, resistance at $4,080 and $4,150. The outcome at this level will determine gold's medium-term trend direction.