Physical gold-backed exchange-traded funds attracted 5.1 tonnes of inflows last week, the largest weekly increase since mid-April, signaling a potential recovery in investor demand. The inflows, totaling about $1.1 billion, followed four consecutive weeks of outflows that saw 58.2 tonnes, or roughly $7.6 billion, leave the funds. Despite this recent positive movement, gold-backed ETFs remain under pressure, with SPDR Gold Shares (NYSE: GLD) and iShares Gold Trust (NYSE: IAU) down 4.79% and 4.73%, respectively, year-to-date.

The resurgence in ETF interest coincides with a cautious outlook from Goldman Sachs, which lowered its year-end 2026 gold price target to $4,900 per ounce from $5,400. The bank cited a more hawkish Federal Reserve outlook and weaker expectations for gold ETF demand as reasons for the revision. Goldman analysts Lina Thomas and Daan Struyven noted that the moderation in gold price appreciation is driven by delayed rate cuts, with economists pushing back expected cuts to June and December 2027. This contrasts with other major banks, as UBS maintains a target of $6,200 and JPMorgan stands around $6,300.

Market pricing currently reflects a tightening monetary policy environment. CME FedWatch data indicates a 40% probability of a 25-basis-point rate hike at the July 2026 meeting, with a 61% probability that the federal funds rate will be in the 4.00%-4.25% range by the December 2026 meeting. Higher interest rates typically weigh on gold by increasing the opportunity cost of holding the non-yielding asset. With the 10-year Treasury yield around 4.4%, the bond market has emerged as a significant competitor to gold.

Total gold ETF holdings rose to 4,086.3 tonnes, approaching levels last seen in mid-January but remaining below the record 4,176.1 tonnes reached in February. At last week's prices, these holdings were valued at about $549.1 billion, compared with the record value of $701.7 billion. Goldman remains structurally constructive longer term, citing continued diversification by central banks as a key driver, but warned of near-term downside risks if Fed hikes materialize. Options positioning suggests investors are increasingly hedging against downside price risks.

Gold has fallen below its 200-day moving average by the largest margin since 2022, marking a notable technical breakdown for the safe-haven asset. This decline suggests investors are rotating out of defensive positions and reallocating capital toward risk-sensitive growth trades. The shift in sentiment is particularly relevant for technology stocks, especially those tied to artificial intelligence, which thrive when market confidence is high.

The precious metal typically attracts capital during periods of economic uncertainty or geopolitical tension. Conversely, when investors embrace risk, money often flows away from gold and into assets with higher growth potential. The current divergence between weakening gold prices and resilient technology stocks indicates a market environment where optimism is driving capital allocation decisions.

Nvidia has emerged as a primary beneficiary of this risk-on sentiment, fueled by the artificial intelligence boom. The company's rally has lifted semiconductor stocks, software names, and the broader technology sector. Investors are betting on sustained future AI spending from hyperscalers such as Microsoft Corp., Amazon.com Inc., Alphabet Inc., and Meta Platforms Inc., a trend that requires confidence rather than caution.

The last time gold traded this far below its 200-day moving average was in 2022, a period that coincided with improving sentiment toward risk assets. While historical patterns do not guarantee future performance, the current technical breakdown is attracting attention as a potential signal of broader market behavior.

The impact of gold's decline is visible across exchange-traded funds. Major gold ETFs, including SPDR Gold Shares (GLD), iShares Gold Trust (IAU), and SPDR Gold MiniShares Trust (GLDM), have all reflected the metal's recent weakness. These funds are down over 10% in the past month, underscoring the magnitude of the shift away from defensive assets.

Whether gold's decline proves temporary or marks the start of a sustained trend remains unclear. However, for investors in high-growth sectors, the current market dynamics suggest a preference for chasing growth over seeking safety.