Analysis-Gold's record rally falters as bulls run into Fed rate expectations, stronger dollar

LONDON, June 12 (Reuters) - Expectations for U.S. monetary tightening and a strong dollar have taken some wind out of the "perfect storm" powering an upswing in gold since 2023, leaving prices in vulnerable ‌territory around $4,000 per ounce as the interest rate backdrop unfolds.

Gold's reversal has raised questions over the longevity ‌of its record-breaking rally even as geopolitical risk, fiscal deficits and central bank buying continue to support the longer-term case for bullion.

After hitting a record $5,595 ​in January, spot gold has fallen 25%, as the Iran war spurred an oil-price rally and boosted bets on rate hikes. That has curbed bullion's safe-haven appeal — consistent with past extreme shocks — and drove prices to a six-month low on Thursday.

"In the very short term, the market has to digest the risk of a Fed hike and a stronger dollar," said Aakash Doshi, ‌head of gold and metals strategy at ⁠State Street Investment Management.

Doshi sees scope for gold to bounce if the Middle East conflict eases and oil falls to $80 a barrel. Longer term, gold could revert to being a safe haven ⁠as fiscal deficits balloon and if the fallout from the Iran conflict leads to fragmented geopolitics.

Gold was at $4,188 per troy ounce on Friday, having touched its lowest level since November at $4,022 on Thursday.

Strong U.S. jobs data last week lifted rate-hike bets and ​sent ​gold below its 200-day moving average for the first time in ​2-1/2 years.

That closely watched key technical level — now ‌acting as resistance at $4,446 — suggests that the dynamic of the market has changed, one precious metals trader said. Gold surged 64% in 2025, the most in 46 years.