Gold and Bitcoin Diverging: Can the $4,200 Gold Price Rally Continue?

On the morning of July 6 Beijing time, spot gold continued to surge, breaking above $4,200/oz again during the session, up over 0.6%. As of press time, spot gold was quoted at $4,189.54/oz. In the previous week, gold experienced a strong rebound after four consecutive weeks of decline, with a weekly gain of over 2%.

Silver also performed strongly. As of July 6, the spot silver price was temporarily quoted at $61.8/oz, once touching a high of $63.25 during the day. Last week (June 29 to July 5), spot silver accumulated a gain of about 5.52%, ending its previous multi-week adjustment pattern.

Why did precious metals collectively strengthen in this market cycle? Is this rebound a short-term technical repair or a signal of a trend reversal? And what does the divergence in performance between gold and Bitcoin under the same macro shock reveal about asset allocation logic?

How Weak Nonfarm Payroll Data Changed Expectations for the Fed's Rate Path

The most direct catalyst for this round of precious metals rebound came from the U.S. June nonfarm payroll data released on July 2. According to data from the U.S. Bureau of Labor Statistics, nonfarm payrolls added only 57k jobs in June, far below the market expectation of 115k, and the previous two months' data were revised downward by a total of 74k. Although the unemployment rate fell from 4.3% to 4.2%, the main reason was a decline in the labor force—the number of employed people aged 25-34 dropped by 700k in a single month.

The significance of this data for gold lies in its systematic change in market expectations for the Fed's policy path. In the first half of 2026, market pricing of the Fed's rate path experienced multiple rounds of reversals. The weak June nonfarm data dealt a major setback to the previously escalating rate hike narrative.

According to CME's "FedWatch" data, the probability that the Fed will keep the current rate unchanged at its July meeting is 82.4%, while the probability of a 25-basis-point hike is only 17.6%. Swap markets show that the probability of a rate hike at the next Fed meeting has fallen from one-third earlier this week to 18%. The market currently sees a 52% probability of a rate hike at the September meeting, down from 64% the previous trading day.

The cooling of rate hike expectations transmits to gold prices through two core channels: first, the real interest rate channel—as a non-yielding asset, gold's holding cost is directly linked to real interest rates; cooling rate hike expectations push down nominal rates, real rates fall accordingly, and gold's attractiveness rises. Second, the U.S. dollar exchange rate channel—weakening rate hike expectations reduce the dollar's interest rate advantage, putting pressure on the dollar index, meaning dollar-denominated gold becomes cheaper for holders of other currencies.

How Geopolitical Risks Provide Premium Support for Precious Metals

If the nonfarm data was the "trigger" for this rebound, then geopolitical risks are the underlying logic continuously providing premium support for precious metals.

The World Gold Council's "2026 Global Gold Market Mid-Year Outlook" report released on July 1 pointed out that the dominant factor driving gold prices in the first half of the year was rising geopolitical risks, with the U.S.-Iran conflict having a particularly significant impact. The complex interplay surrounding U.S.-Iran cease-fire negotiations, control of the Strait of Hormuz, and U.S. domestic political and economic games is forming a textbook macro picture, providing strong underlying logic support for gold.

Entering July, geopolitical risks have not subsided. The Iranian ambassador to China confirmed that Tehran plans to impose new service fees on ships passing through the Strait of Hormuz. The speaker of the Iranian parliament stated that Tehran will not negotiate a final agreement with the U.S. unless every clause of the memorandum of understanding is implemented. These developments indicate that uncertainty in the Middle East situation continues.

The support mechanism of geopolitical risks for gold is dual: on the one hand, it directly triggers safe-haven demand, driving funds into safe assets like gold; on the other hand, it triggers inflation concerns through energy price transmission, indirectly affecting the Fed's monetary policy path. In the second half of the year, the repeated fluctuations in the geopolitical situation are expected to keep gold prices oscillating in a wide range.

Why Gold and Bitcoin Diverge in Performance Under the Same Macro Shock

On July 3, the crypto market also rebounded. Bitcoin rose from a low of $59,776 to $61,507. On July 6, Bitcoin further recovered to above $63,000. Loose liquidity expectations also boosted risk asset sentiment.

However, the price reactions of gold and Bitcoin under the same macro shock reveal the vastly different market positioning of the two assets. Since the beginning of 2026, the performance of Bitcoin and gold has continued to diverge—Bitcoin has fallen about 28% year-to-date, while gold has fallen only about 3.9%.

The root of this divergence lies in the fundamental difference in safe-haven attributes. Gold is a classic "safe-haven currency," performing strongly during geopolitical conflicts, wars, or systemic crises. Bitcoin, on the other hand, behaves more like a high-beta "risk asset" or liquidity-sensitive instrument, significantly influenced by risk appetite and the correlation with U.S. stocks, often falling alongside equities during panic periods. As analysts have pointed out, "during periods of stress and uncertainty, liquidity preference dominates, and this dynamic hurts Bitcoin far more than gold."

The one-year rolling correlation between gold and Bitcoin turned negative in February 2026, falling to -0.17. This means the two are no longer a common exposure to the same macro theme but exhibit genuine diversification characteristics.

Why Silver Shows Higher Elasticity in This Rebound

Silver outperformed gold in this rebound—a weekly gain of 5.52% was significantly higher than gold's 2.16%. This higher elasticity stems from silver's dual identity, combining financial and industrial attributes.

On the financial attribute front, silver is highly correlated with gold, belonging to the same precious metals safe-haven asset class. Fed monetary policy expectations are also a core variable affecting silver's financial attributes. The weakening U.S. dollar and cooling rate hike expectations have also provided upward momentum for silver.

On the industrial attribute front, silver's widespread industrial applications in photovoltaics, new energy vehicles, electronics, etc., mean its price is also significantly affected by changes in industrial demand. The global silver market has been in a supply-demand deficit for several consecutive years, and 2026 is expected to maintain a structural deficit. Although the supply-demand gap is narrowing, the fundamentals still provide a floor for silver prices.

The decline in the gold-to-silver ratio (gold price/silver price) is also noteworthy. As the gold-to-silver ratio fell below 67, silver prices broke through the $62 mark. The mean-reverting logic of the gold-to-silver ratio—when gold has outperformed silver significantly, funds flow to relatively undervalued silver—also partly explains silver's stronger short-term elasticity.

How Central Bank Gold Purchases and Institutional Expectations Build a Floor for Gold Prices

Before this rebound, gold experienced a difficult first half of the year—falling sharply from a January high of $5,405 to a June low of $4,002, down about 7% year-to-date, with average volatility rising to 30%.

But two structural factors are building a floor for gold prices.

The first is continued central bank gold purchases. A survey by the World Gold Council shows that central banks are increasingly viewing gold as a tool to hedge against financial crises, inflation, and geopolitical risks, with nearly 90% of respondents expecting global central bank gold reserves to increase in the next year. CNBC analysis indicates that central bank buying provides a solid floor for gold at around $3,900. A survey of 74 central banks shows that 64% expect gold prices to exceed $5,000 per ounce by June next year.

The second is institutional optimism about gold's long-term prospects. State Street Global Advisors predicts gold prices could reach $5,500 by the first quarter of 2027. CITIC Securities points out that gold prices and gold stocks have been severely oversold since the U.S.-Iran conflict, and expects gold to trade in the range of $4,000–$4,500/oz in the third quarter of 2026. Goldman Sachs says "gold is not done yet," characterizing the recent four-month weakness as a consolidation phase after a 123% surge since 2022.

Current Technical Position of Gold Prices and Market Bull-Bear Divergence

Although gold has rebounded significantly from its June low, the technical picture shows that the market remains divided.

From a technical indicator perspective, gold has found support above the 21-day simple moving average (SMA), but the daily relative strength index (RSI) remains bearish. Gold prices are still below the 50-day SMA (approximately $4,392), 200-day SMA (approximately $4,488), and 100-day SMA (approximately $4,628), with a dense trend resistance band above. Additionally, the 50-day SMA crossed below the 200-day SMA at the weekly close, forming a "death cross," keeping sellers hopeful.

The core divergence between bulls and bears is whether this rebound is a trend reversal or a technical correction within a downtrend. Bulls argue that with weak nonfarm data and geopolitical risk premiums, if the rate hike expectation trade is fully corrected, gold prices could return to $4,500–$5,000/oz. Bears argue that the actual level of gold ETF holdings remains above the level justified by rate guidance, with a deviation as high as 10%, reaching levels comparable to the safe-haven positions accumulated during the 2020 pandemic and the 2022 Russia-Ukraine conflict. If sentiment reverses, position unwinding could trigger further pullbacks.

In the short term, whether gold can hold above $4,200 depends on the dollar's trend, developments in the Middle East, and further economic data verification of rate hike expectations.

Summary

Spot gold approached $4,200, rebounding 2.16% for the week; spot silver rose 5.52% for the week. This strong performance in precious metals was driven by two core logics: the weak U.S. June nonfarm payroll data significantly cooled market expectations for a Fed rate hike, opening upward space for gold through lower real rates and a weaker dollar; simultaneously, geopolitical risks such as the Strait of Hormuz continued to provide safe-haven premium support for precious metals.

Notably, the performance of gold and Bitcoin under the same macro shock continues to diverge—gold, as a classic safe-haven asset, benefits from uncertainty, while Bitcoin still exhibits the volatility characteristics of a risk asset, with their one-year rolling correlation turning negative. Silver, with its dual financial and industrial attributes, has shown higher price elasticity in this rebound.

Central banks' continued gold purchases and institutional long-term optimism provide structural floor support for gold, but technical resistance above is dense, and bull-bear divergence remains significant. Whether gold can hold above $4,200 and further open upward space still requires confirmation from more macro signals.

FAQ

Q1: What are the main drivers of the spot gold rebound?

The rebound is mainly driven by two factors: first, the U.S. June nonfarm payroll data fell well below expectations (only 57k jobs added), significantly cooling market expectations for a Fed rate hike, opening upward space for gold by lowering real interest rates and the dollar index; second, ongoing geopolitical risks such as the Strait of Hormuz provide safe-haven premium support for gold.

Q2: Why did silver rise more than gold?

Silver has a dual identity combining financial and industrial attributes. On the financial front, silver is similarly boosted by cooling rate hike expectations and a weaker dollar; on the industrial front, silver's wide industrial applications in photovoltaics, new energy vehicles, etc., make it sensitive to changes in industrial demand. The mean-reverting logic of the gold-to-silver ratio also drives funds to relatively undervalued silver.

Q3: What is the difference in safe-haven attributes between gold and Bitcoin?

Gold is a classic "safe-haven currency," performing strongly during geopolitical conflicts and systemic crises. Bitcoin behaves more like a high-beta "risk asset" or liquidity-sensitive instrument, significantly influenced by risk appetite and the correlation with U.S. stocks, often falling alongside equities during panic periods. Since the beginning of 2026, Bitcoin has fallen about 28% year-to-date, while gold has fallen only about 3.9%, and their one-year rolling correlation has turned negative.

Q4: Where is gold's technical position currently?

Gold has reclaimed the 21-day SMA (around $4,157), but prices remain below the 50-day SMA (around $4,392), 200-day SMA (around $4,488), and 100-day SMA (around $4,628), with dense resistance above. The "death cross" formed by the 50-day SMA crossing below the 200-day SMA still pressures bulls.

Q5: What do institutions think about gold's outlook?

State Street Global Advisors predicts gold prices could reach $5,500 by Q1 2027; CITIC Securities expects gold to trade in the range of $4,000–$4,500/oz in Q3 2026; Goldman Sachs says "gold is not done yet," characterizing the recent pullback as a consolidation phase after a long-term rally. A survey of 74 central banks shows that 64% expect gold prices to exceed $5,000 by June next year.