Global gold prices have rebounded after sliding to their lowest level of the year, but forecasts suggest limited room for further gains. As expectations for U.S. interest rate cuts have weakened and a series of mega initial public offerings (IPOs) including SpaceX loom, analysts say investment funds could shift from gold, a safe-haven asset, to riskier assets.
International gold futures rose 2.78% from the previous trading day to $4,228.3 per ounce during intraday trading Friday. The rebound from an oversold position is attributed to the emerging possibility of an end to the conflict between the United States and Iran.
Hopes for easing geopolitical tensions formed after U.S. President Donald Trump mentioned the possibility of signing a memorandum of understanding (MOU) to end the conflict instead of additional airstrikes on Iran. Gold prices broke above $5,500 per ounce early this year, setting a record high, but recently fell to around $4,046, marking the lowest level of the year.
However, the market views the investment environment surrounding gold as unfavorable despite the short-term rebound. International oil prices surged after the Iran war, renewing inflation concerns, which in turn pushed back expectations for interest rate cuts by the U.S. Federal Reserve (Fed).
Gold is a representative non-yielding asset that pays neither interest nor dividends. As a result, its relative investment appeal declines as interest rates rise. Recently, the market has been discussing not only a reduction in the number of rate cuts within the year but also the possibility of additional tightening.
"Investors are selling gold as they reduce portfolio risk," said Peter Kinsella, head of investment services at UBP. "Demand to secure cash to cover margin pressure on other assets is leading to gold selling."
In particular, analysts say the market's interest is shifting from gold to next-generation growth assets. With growing expectations for listings of artificial intelligence (AI) companies such as OpenAI and Anthropic, along with SpaceX's record-breaking $75 billion IPO, observers say large-scale liquidity could move into the technology stock market. Major IPOs have the effect of absorbing institutional investor and hedge fund capital.
