(Kitco News) – Despite gold’s dramatic fall from $5,500 per ounce earlier this year to below $4,000 in late June, the yellow metal is still among the top performers over the past year, and demand central banks and long-term investors should limit downside risk as gold still retains clear upside potential for the remainder of 2026, according to the new mid-year outlook from the World Gold Council (WGC).
“At current levels, gold’s price is broadly in line with a global backdrop of moderate growth, cooling but still elevated inflation, and expectations of further – but limited – central bank tightening,” wrote authors Juan Carlos Artigas, Taylor Burnette and Dr. Fergal O'Connor in the outlook. “Under these conditions, gold will likely stay relatively rangebound (±5%). But the stage is set for a possible breakout.”
“On the upside, clear catalysts – a worsening economy or renewed geopolitical shock, a shift towards lower interest-rate expectations, or a wave of dip buying – could reignite gold’s momentum and lift it back towards US$4,500/oz or above,” they said. “If the signals are strong, gold could push even higher. Conversely, an environment of resilient growth, rising yields, and calmer markets could see gold slip further – though a fall of more than 10% from current levels may be tempered by bargain-hunting demand.”
The authors also pointed to “enduring central bank demand and policy shifts in key markets like India” as wildcards that could influence gold’s performance through the second half of the year as they mapped the precious metal’s potential paths.
The WGC noted that while gold was currently down around 7% year-to-date, this modest number concealed the far more dramatic move up to $5,500 and down to sub-$4,000 levels.
“This sharp price swing pushed realised volatility to more than 50%, alongside a broader rise in cross-asset volatility at the onset of the US–Iran conflict,” they noted. “Gold’s volatility has since come down below 30%, although it remains above its 20-year average of 17%.”
“Our historical analysis, however, suggests that gold volatility spikes tend to mean revert,” they added.
But notwithstanding the recent price pullback, gold remains one of the best-performing assets of the last 12 months, with other assets still playing catch-up.
The WGC said that their intraday analysis suggests that the lion’s share of gold’s significant price movements took place during Asian and US trading hours. “Many of the pullbacks occurred during US hours and, conversely, gold’s rebounds generally occurred during Asian hours,” they noted. “This further highlights the increasingly relevant role that Asian investors (and consumers) play in price discovery and direction.”
Turning to the second half of 2026, the authors said investors are faced with two overriding questions: “Is gold trading at fair value?” and “what factors would push gold up or down from these levels and by how much?”
They said that the WGC’s proprietary Gold Valuation Framework “suggests that current gold prices are reasonably aligned with the macro consensus.
“Importantly, as gold is a global asset that is bought and sold by consumers and investors around the world, its price also reflects an international perspective,” they wrote. “So, while factors such as the direction of US rates and the dollar remain important, they are not the sole determinants of the direction the gold price takes. Overall, the gold price today broadly reflects these dynamics. This implies, based on our analysis, that if current conditions do not materially change, gold may trade ±5% around US$4,100/oz during the second half of the year.”
In their review of various bull-case scenarios, the authors said gold might be able to resume its upward trend this year, but it would require a clear catalyst.
“This could come from three primary sources,” they said: Worsening economic or geopolitical conditions; A reversal in interest-rate expectations; and Long-term investor participation.
“In this context, our macro-based scenario analysis suggests that gold could resume its upward trend around US$4,500/oz, but only a strong, clear signal may push it sustainably towards US$5,000/oz,” they wrote.
The authors then turn to the key bearish factors that could push gold prices below current levels.
“In recent months, gold has been more susceptible to downside risks,” they wrote. “Following its exceptionally strong 2025 performance, many investors have looked to take profits or rebalance holdings. The volatility increase has not helped either, as risk managers have reviewed their exposure to gold.”
The three key areas the WGC believes could produce further downward pressure on gold prices are: US dollar strength and rates rising beyond current expectations; Investor risk-on sentiment; and Technical factors.
“Overall, our macro-based scenario analysis suggests that if gold were to decline by 10%–15% from current levels, further downside would likely be limited as, historically, lower prices trigger buying from various sectors,” they said.
Beyond these positive and negative macro factors, the WGC said two key market segments have the ability to influence gold’s performance through the latter half of 2026 on their own: Central banks, and India.
“Central banks have been an important contributor to gold’s performance, having bought an average of 1,000t per year since 2022,” the authors noted. “In the first quarter of this year various central banks tactically sold (or swapped) gold. Despite this, initial estimates suggest that banks will continue to be consistent net buyers this year, but questions have been raised about the pace of their purchases.”
The authors cite the recent WGC Central Bank Gold Reserves Survey, which indicated continued appetite from the official sector. “An increasing proportion of reserve managers noted that they expect their own gold reserves to rise over the next twelve months,” they said. “But an increase in the number of central banks entering the market does not necessarily signal the magnitude of their purchases.”
“Our analysis suggests that, all else equal, an additional 20t–30t increase in reserves above the long-term average of around 600t per year should translate into approximately a 1% increase in the gold price,” the authors wrote. “This effect comes not only from the central bank purchases themselves but also from the positive signal it sends to investors. For example, gold tends to exhibit strong returns in periods when the combined contribution from central banks and investment to total demand exceeds 30%.”
“A marked deceleration in central bank buying would, of course, create headwinds for gold.”
And the massive and influential Indian market also has the potential to exert significant influence on gold’s price performance.
“India is gold’s second largest market with net demand of 800t per year,” they said. “But unlike China, whose gold market appears to be responding as expected to current conditions, India needs to import all its gold – a factor that regularly weighs on its current account deficit.”
The WGC pointed out that the Indian government was forced to intervene to conserve foreign exchange reserves amid mounting pressure on the rupee as the US–Iran conflict impacted India’s oil supply and domestic energy prices.
“Since early April, it has adopted a series of measures aimed at moderating gold imports, including a sharp duty increase – from 6% to 15% – and consumer-directed messaging aimed at curtailing gold purchases,” the authors said. “Our econometric analysis suggests that the country’s import duty increases alone will reduce jewellery, bar and coin demand by 50t–60t (or about 10% y/y).”
“We believe the impact from the increased duty should already be reflected in the gold price,” they added. “But further economic deceleration could impact Indian gold demand through the well-established income effect, deterring Indian consumers and investors from taking advantage of pullbacks to enter the market. Furthermore, defaults on collateralised gold loans – which have been gaining traction over the past few years – could increase, thus boosting gold supply.”
The authors conclude by noting that gold’s behavior during the first half of 2026 “underscores its sensitivity to shifting macroeconomic conditions, geopolitical risk, and investor sentiment, while highlighting the growing influence of global, particularly Asian, demand.”
“Looking ahead, gold is likely to remain rangebound under current expectations but retains clear upside potential if risks intensify or policy expectations shift,” they wrote. “At the same time, structural support from central banks and long-term investors may help limit downside, reinforcing gold’s role as a strategic and resilient asset in an uncertain global environment.”
