Gold’s sharp correction is entering a critical phase, with prices slipping nearly 26 per cent from their record peak and approaching key technical support levels. The decline, now steeper than the 2022 downturn, has heightened concerns that bullion could be heading toward a deeper and more prolonged pullback if macro pressures persist.
After touching a historic high near USD 5,600 per ounce earlier this year, gold prices have come under sustained pressure, falling to around USD 4,300 per ounce. The scale of the correction has already surpassed the roughly 22 per cent decline seen during the U.S. Federal Reserve’s aggressive tightening cycle in 2022, making it one of the most pronounced pullbacks in recent years.
Created with AI. Errors are possibleThe fall is likely due to a combination of resilient U.S. economic data and tightening financial conditions. A stronger-than-expected labour market report showed the U.S. economy added 172,000 jobs in May, significantly above expectations of around 85,000. This reinforced confidence in economic strength but also pushed U.S. Treasury yields higher, with the 10-year yield climbing to 4.57 per cent, its highest level in two weeks. At the same time, expectations of a potential Federal Reserve rate hike in December rose sharply, further weighing on gold’s appeal.
A firmer U.S. dollar has added to the downward pressure. The Dollar Index recently reclaimed the key 100 mark for the first time in nearly two months, making gold more expensive for holders of other currencies and reducing the attractiveness of non-yielding assets. Investor positioning has also shifted notably, with ETF investors booking profits after gold’s record rally and speculative long positions seeing liquidation as interest rate expectations evolve, as per Ajay Kedia, Director at Kedia Advisory Pvt. Ltd.
Kedia noted that crude oil prices have emerged as another influential factor shaping the macro backdrop. Brent crude has surged to around USD 119 per barrel, up nearly 60 per cent from its January 2026 lows, amid geopolitical tensions and supply concerns. With U.S. inflation still elevated at around 3.8 per cent, well above the Federal Reserve’s 2 per cent target, the spike in energy prices has reinforced expectations that interest rates could remain higher for longer. This environment typically acts as a headwind for gold, which does not offer any yield.
“Gold has already corrected nearly 26% from its record high near USD 5,600 per ounce, exceeding the decline witnessed during the 2022 Federal Reserve tightening cycle. With prices now approaching the critical USD 4,098 support zone, the market is entering a decisive phase,” Kedia said. He added that a breach of this level could accelerate selling pressure and deepen the correction.
Historically, the current fall is beginning to draw parallels with major past downturns in gold. During the 2008 global financial crisis, the metal declined around 34 per cent before resuming its long-term uptrend. Following its 2011 peak, gold entered a prolonged bear phase, ultimately losing nearly 46 per cent of its value. While the current correction remains smaller in comparison, its pace and magnitude have already placed it among the sharper declines of the past decade, Kedia said.
Physical demand trends have also softened in key markets. In India, elevated domestic prices combined with a 15 per cent import duty have dampened jewellery demand, prompting buyers to defer purchases. Although central banks continue to accumulate gold, supporting the long-term outlook, the pace of buying has moderated compared with the record levels seen in 2025.
“From a technical standpoint, the USD 4,098 level is widely seen as a crucial near-term support. A decisive break below this threshold could trigger momentum-driven selling and push prices toward the USD 3,550–USD 3,600 range. On the upside, the USD 4,600 to USD4,640 zone is expected to act as a strong resistance band. Unless gold manages to reclaim and sustain above this range, analysts believe downside risks will remain elevated,” Kedia noted.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)
