Gold prices little changed in July, but could the yellow metal recover?
Despite its reputation as a safe haven and a hedge against inflation, gold has struggled to regain momentum since the outbreak of the war in Iran.
The price of gold rose just 0.85% over the course of July as the yellow metal was hampered by resurgent conflict and higher global interest rate expectations.
Gold prices dipped below $4,000 per troy ounce for the first time since November 2025 in late June, and has hovered around that level ever since.
The highest the gold price reached during the month was slightly over $4,200, on 6 July.
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Gold closed 31 July at $4,042.67, down 6.3% over the first seven months of the year and 27.8% from the all-time high price of $5,595.46, reached on 29 January.
Gold has sold off this year as inflation has risen, exacerbated by the conflict in the Middle East, prompting some to question whether gold still acts as an inflation hedge.
While gold is typically viewed as a safe haven during times of crisis, its gains during 2025 made gold holdings an obvious asset for liquidity-hit investors to sell once the conflict in Iran broke out at the end of February.
“Gold is often considered to be a haven in troubled times, but what many people don’t realise is that its price can still drop in a falling market,” said Dan Coatsworth, head of markets at AJ Bell. “Investors often sell what they can in the face of trouble, and gold is a liquid asset.”
But the selloff didn’t start or end with the conflict in Iran. Its price has continued to fall even as the war appears to be drawing to a conclusion.
“Recently, gold has become increasingly sensitive to the same oil-price and inflation dynamics affecting broader markets, meaning its behaviour may be more correlated with other assets than investors have come to expect,” Matt Bance, solutions strategist and portfolio manager at investment manager T. Rowe Price, told MoneyWeek.
What is currently weighing on the gold price, and where might it go from here?
Why is the gold price falling?
Several factors led to the price of gold falling after the US/Israeli war with Iran broke out, besides the aforementioned liquidity rush that set in at the start of the conflict.
Gold is priced in dollars, and had therefore been benefitting from a weaker dollar prior to the outbreak of the war.
Greater inflationary expectations also reduced the chances of central banks cutting interest rates. Hawkish central bank policy, particularly in the US, is typically negative for gold prices because higher rates increase the appeal of bonds compared to gold, which pays no income.
Either side of the war there has been much focus on the policy outlook of the Federal Reserve’s (Fed) new chair, Kevin Warsh.
Warsh is regarded as more hawkish (favouring relatively higher interest rates) than other contenders for the position. Gold prices fell immediately following his announcement as Trump’s pick for the post in January.
US inflation fell to 3.5% in June, but it had spiked to 4.2% in May, and higher oil prices during July could provide further inflationary impetus.
This could force the Fed to hike rates, or at least postpone cuts. At its meeting on 29 July, the Federal Open Market Committee (FOMC) (the Fed’s committee that sets interest rates – equivalent to the Bank of England’s Monetary Policy Committee) held US interest rates at 3.50-3.75%.
Rate-setters balance the need to hike interest rates in order to curb inflation against the risk that doing so will hinder economic growth. But US economic data paints a picture of a strong economy: on 30 June, the US Bureau of Labor Statistics revealed that US job openings increased by 9,000 in May, strengthening the hawkish argument for relatively higher interest rates.
“A run of resilient US economic data has cemented expectations that the Federal Reserve still has scope to raise interest rates,” said Susannah Streeter, chief investment analyst at wealth manager Wealth Club. “Stronger jobs data and stubborn inflation have reinforced the view that rates are likely to stay higher for longer, pushing up Treasury yields and the dollar, while taking some of the shine off gold.”
Should you buy gold?
A more hawkish Fed means that the short term outlook for gold isn’t particularly positive, and there are other reasons to believe that gold prices could fall further before they start to rise again.
“A significant portion of the structural bull case is now reflected in prices,” said T. Rowe Price’s Bance. “Central bank demand moderated in the first quarter of 2026, while exchange-traded fund (ETF) demand has also softened.”
As its declines this year have shown, gold has a lot of risk attached to it considering many consider it a defensive asset.
“Gold may glitter as a safe haven during periods of heightened uncertainty, but it's far from immune to volatility,” said Wealth Club’s Streeter. “The precious metal tends to bask in demand when nerves are on edge, but its fortunes can quickly tarnish when expectations for interest rates change, which they have recently.”
Despite this many experts, Bance included, think there is still an argument for holding gold given its long-term diversification potential.
“While market dynamics reduce some of gold’s diversification appeal in the near term, we continue to believe gold deserves a place in diversified portfolios,” he said. “Gold provides diversification against inflation surprises, fiscal deterioration, reserve currency uncertainty, and broader confidence shocks. Those risks remain relevant, which is why we continue to favour maintaining a strategic allocation.”
Gold’s rapid price gains since late 2024 have largely been underpinned by demand for central banks. This source of demand weakened slightly in the first quarter of 2026, but appears to have rebounded in the second quarter.
“Central banks made significant gold purchases in Q2,” said Louise Street, senior markets analyst at the World Gold Council. “After a notable Q1 slowdown… buying among this cohort recovered sharply to the lofty levels that have been typical in the last four years.”
How to gain exposure to gold prices
If you are considering where to invest and want to add some gold exposure, there are three main approaches.
The first one is investing in the metal itself through a financial contract, such as an ETF or exchange-traded commodity (ETC).
See our article on the best gold ETFs for more information.
You can also get indirect exposure by investing in the miners that dig gold out of the ground. This can be done by investing directly in their shares, or by buying a gold fund or investment trust.
Lastly, you can buy physical gold bars or gold coins.
In terms of how much gold to hold in a portfolio, Tom Stevenson, investment director at Fidelity International, suggests around 5-10% – which is about the same as you might hold in cash.
“The two offer insurance and dry powder to complement the growth and stability of the shares and bonds that make up the bulk of a balanced portfolio,” he said.
