Gold prices have slumped into a bear market this year, falling by over 27% from their January high even as geopolitical risks escalated. The metal’s underperformance against the stock market is largely attributed to falling exchange-traded fund (ETF) inflows and rising US government bond yields, which have made fixed-income assets more attractive to investors.

Demand for gold among American investors has waned as capital rotated toward the memory sector. Data indicates that the SPDR Gold Shares ETF (NYSE: GLD) recorded over $1.63 billion in outflows in the last 30 days and $7.4 billion in the last three months. Its six-month outflows have jumped to over $12.2 billion. Similarly, the iShares Gold Trust (NYSE: IAU) suffered $1.2 billion in outflows in the last 30 days and $4.5 billion in the last six months. The SPDR Gold Minishares Trust (NYSE: GLDM) also saw over $75.5 million in outflows.

In contrast, the recently launched Roundhill Memory ETF (CBOE: DRAM) has accumulated over $23 billion in assets, driven by demand for companies like Micron and Sandisk. This rotation highlights a shift in investor preference from traditional safe-haven assets to growth-oriented technology sectors.

Macro Drivers and Bond Yields

Geopolitical tensions, including the escalating conflict between the US and Iran, continued fighting between Ukraine and Russia, and intensified trade wars under Donald Trump, have theoretically supported gold prices. However, these events have also led to higher crude oil prices, with Brent retesting the resistance level of $100 for the first time in over a month.

Rising oil prices have fueled inflation expectations, increasing the odds that the Federal Reserve will hike interest rates to 73% on Polymarket. Consequently, US government bond yields have jumped significantly. The two-year yield rose to 4.33%, while the ten-year yield moved to 4.70%. As a result, gold is now competing directly with these higher-yielding bonds for investor capital.

Technical Outlook

Despite the broader downtrend, there are signs that gold may be showing bottoming patterns. The price has formed a double-bottom pattern at $3,940. Oscillators such as the Relative Strength Index (RSI) and the Percentage Price Oscillator (PPO) are forming bullish divergence patterns. The RSI has been in an upward trend and is nearing the psychological level of 50, while the two lines of the PPO have been rising and are approaching the zero line.

These technical signals suggest a possibility that gold could bounce back, potentially targeting the key resistance level of $4,378, which was its highest point on June 18. However, the sustained outflows from major ETFs and rising bond yields continue to pose significant headwinds for any immediate recovery.

Spot gold rose nearly 1% to $4,093.63 per ounce, recovering after briefly trading below $4,000 — a level it had not breached since 1 July. The rebound follows a turbulent stretch in which gold fell approximately 2.60% over the week ending 17 July, pressured by surging oil prices that stoked U.S. interest rate hike expectations and a stronger dollar. The latest uptick signals renewed buying interest after the metal's sharp pullback.

Factors Behind the Earlier Decline

The preceding week's selloff was driven by a roughly 16% surge in Brent crude, fueled by strikes near the Strait of Hormuz that restricted oil flows. J. Rotbart & Co., a precious-metals consultancy, noted that higher energy costs feed inflation expectations and support the case for elevated interest rates, increasing the opportunity cost of holding non-yielding assets like gold. Futures markets had priced approximately a 58% chance of a U.S. interest-rate increase in September, according to CME FedWatch data, while the stronger U.S. dollar made gold more expensive for buyers holding other currencies.

"War does not automatically lift gold, and it never has," said Joshua Rotbart, Founder of J. Rotbart & Co. "Markets weigh several forces at once. This week, the inflation and interest-rate effects of higher oil prices carried more weight than the instinct to seek shelter."

Asian Physical Markets Remain Steady

Physical markets in Asia remained calm throughout the volatility. Gold in Singapore changed hands between a $1 discount and a $2 premium to global spot prices, while Hong Kong saw trading between a $1 discount and a $1.70 premium. These narrow ranges indicated steady, price-sensitive buying rather than a scramble for metal. Hong Kong dealers had identified $4,000 as a strong support level, which gave way briefly before the latest recovery. China's central bank added 14.93 tonnes of gold in June, marking its 20th consecutive month of purchases, which helped stabilize prices.

Market Outlook and Strategic Allocation

The consultancy emphasized the distinction between short-term price speculation and long-term wealth structuring. "There is a difference between speculating gold around headlines and owning allocated precious metal as a generational wealth strategy," Rotbart said. He highlighted that allocated ownership allows for insured transfers between vaults in stable jurisdictions, such as Singapore and Hong Kong, turning geopolitical risks into manageable logistical matters.

Key Gold Market Metrics