World Gold Council: Current Price Decline Is a Temporary Correction, Not the Start of a Long-Term Bear Market

The World Gold Council (WGC) believes that the current decline in gold prices represents a temporary market correction rather than the beginning of a prolonged bearish cycle, emphasizing that the fundamental drivers supporting the precious metal remain intact despite recent market pressures.

Andrew Naylor, Head of Middle East and Public Policy at the World Gold Council, said in an interview with Asharq Business that gold is currently facing headwinds from the stronger U.S. dollar and investors' anticipation of upcoming U.S. inflation data and the Federal Reserve's monetary policy decisions.

According to Naylor, the slower pace of interest rate cuts has increased the opportunity cost of holding non-yielding assets such as gold, weighing on investment demand.

Gold recently fell below $4,000 per ounce for the first time since November, while the U.S. Dollar Index gained approximately 0.8% this week, making dollar-denominated precious metals more expensive for buyers using other currencies.

Weak Demand in China and India

Naylor noted that weakening demand in China and India, the world's two largest gold-consuming markets, is among the key factors currently pressuring prices.

He attributed softer demand in India partly to higher taxes on gold imports, while China's market continues to struggle with the slowdown in the property sector, in addition to seasonal factors that have curbed consumer purchases.

"There is weakness across all areas of gold demand," Naylor said. "However, we believe these pressures are temporary, while the long-term fundamentals remain positive."

 Rally Loses Momentum

The recent decline has brought an end to an exceptional multi-year rally in gold. The precious metal delivered double-digit annual gains in each of the past three years, more than doubling in value as central banks, institutional investors, and retail buyers aggressively accumulated bullion.

However, the rally began to lose momentum in late January after gold reached a record high of nearly $5,600 per ounce. By June, prices had fallen by more than 20% from their peak—a level traditionally associated with the onset of a bear market.

The outbreak of conflict between the United States and Iran also weighed on gold by driving energy prices higher and fueling inflationary pressures, reinforcing expectations that the Federal Reserve would maintain a restrictive monetary policy for longer.

 Long-Term Outlook Remains Positive

Several major financial institutions, including Deutsche Bank, Goldman Sachs, and Bank of America, have lowered their year-end gold price forecasts to around $4,900 per ounce, down from previous projections of $6,000. Nevertheless, they continue to maintain a constructive long-term outlook for the precious metal.

Naylor stressed that gold will remain an effective long-term hedge against inflation, pointing to continued central bank purchases, persistent geopolitical risks, rising public debt levels across advanced economies, concerns over debt sustainability, and questions surrounding the Federal Reserve's independence as key structural drivers supporting the market.

A recent World Gold Council survey found that 89% of central banks expect their gold reserves to increase, while 45% plan to raise their gold holdings over the next 12 months, underscoring the importance of official-sector demand as one of the market's strongest structural pillars.

He also highlighted the historical relationship between gold and geopolitical uncertainty, noting that a 100-basis-point increase in the geopolitical risk index has historically lifted gold prices by approximately 2.5%.