Gold prices may have recovered from their recent lows, but the yellow metal is unlikely to revisit the record highs seen in January 2026 anytime soon, according to a new report by BMI, a Fitch Solutions company. BMI has revised its 2026 average gold price forecast to $4,400 per ounce from $4,600, citing a stronger US dollar, easing geopolitical tensions and improving macroeconomic conditions as key headwinds. While the report says much of the recent correction may already be behind the market, it remains neutral to bearish on gold for the rest of the year.
Here are the five factors that BMI believes could keep gold prices under pressure through 2026.
1. The US Federal Reserve is likely to stay on pause
Interest rates remain one of the biggest drivers of gold prices. Since gold does not generate interest or dividends, it tends to become less attractive when borrowing costs remain elevated.
BMI expects the US Federal Reserve to keep the federal funds rate unchanged at 3.75% for the remainder of 2026 after leaving policy settings unchanged in June. Stable interest rates are likely to keep bond yields relatively elevated, reducing investor appetite for non-yielding assets such as gold. The report cautions that any unexpected rate hikes would further weaken the outlook for bullion.
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2. A stronger US dollar could limit gains
Gold usually moves inversely to the US dollar. When the dollar appreciates, gold becomes more expensive for buyers using other currencies, often reducing global demand.
BMI expects the Dollar Index (DXY) to remain broadly in the 98-102 range, but estimates a 30-40% probability that it could strengthen to 105-110. Such a move would likely keep gold prices capped even if physical demand remains healthy.
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3. Improving global growth is reducing safe-haven demand
The report says the global economic outlook has improved modestly following the memorandum of understanding signed between the US and Iran, which has eased market concerns over disruptions to global trade and energy supplies.
As investor confidence improves, money typically shifts from defensive assets such as gold to equities and other risk assets. BMI expects global real GDP growth of 2.4% in 2026, supporting a gradual move away from safe-haven investments.
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4. Lower geopolitical risks are weighing on bullion
Geopolitical tensions have been one of the biggest reasons behind gold’s rally over the past year. However, BMI believes the easing of tensions between the US and Iran has reduced the geopolitical risk premium that had supported prices.
The report says a more stable geopolitical environment and the expected normalisation of shipping through the Strait of Hormuz have weakened demand for gold as a crisis hedge, although implementation risks surrounding the agreement remain.
5. Moderating inflation expectations could reduce demand for gold
Gold is widely used as a hedge against inflation. As inflation expectations cool, investor demand for the precious metal often softens. According to BMI, lower energy prices are helping reduce near-term inflation expectations, although some upside risks remain. If inflation continues to moderate while monetary policy stays broadly stable, gold could lose another important source of support.
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Despite its cautious outlook, BMI does not expect a return to pre-pandemic gold prices. Central bank purchases continue to provide structural support, and the report says much of the recent correction has already played out. However, it notes that Fed rate cuts or a weaker US dollar could lift gold back above $4,500 per ounce, while stronger-than-expected dollar gains or higher bond yields could push prices closer to $3,500 per ounce.