Gold has been on a spectacular ride over the past year, having breached the US$5,000 an ounce mark before falling back down to around US$4,000 — though still well above historic levels.

Many factors influence the price of gold, but fund managers say interest rate expectations have been driving the bus in recent months as inflation forecasts and the Iran war have led to changing predictions on what central banks like the U.S. Federal Reserve have in store for rates.

“There was this narrative around interest rate cuts being basically baked in 100 per cent in the foreseeable future, so you saw a lot of excitement around the gold space and the gold price driving that up,” said Edward Dashwood, portfolio manager and partner at Letko Brosseau & Associates.

“What we’ve seen in the last six months or so is there’s been pretty much a complete 180 (degree) reversal in one of those factors, which is the interest rate expectations going forward.”

At its meeting in June, the U.S. Fed released projections showing policymakers see the federal funds rate trending higher later this year and into the next, a change from previous forecasts. The meeting was also the first with Kevin Warsh as Fed chairman and spurred the market to price in a more hawkish stance.

Gold becomes less appealing to investors when borrowing costs rise because they can capitalize on interest-paying asset classes instead.

“With the expectations that rates are going to be going up, it’s putting pressure on the gold price and interestingly, it seems that it’s outweighing gold’s traditional position as a safe-haven asset,” Dashwood said.

During times of upheaval, such as when trade disputes flared up after U.S. President Donald Trump’s return to the White House and during the war in the Middle East, gold has often acted as a safe-haven asset for investors.

Dashwood says rising rate expectations have now taken a front seat instead.

The price of gold peaked in January, reaching US$5,500 an ounce. Since then, it has fallen to about US$4,100 per ounce, similar to where it stood in November 2025. Gold prices may be off the peak, but remain higher compared with recent years since gold first crested the US$2,000 benchmark in 2020.

On the flip side, if the rise in inflation stemming from the U.S.-Iran war is more short lived and central banks look to stimulate the economy via rate cuts, that would likely give gold a boost, Dashwood said.

Sam Baldwin, senior portfolio manager at Guardian Capital LP, said that gold is in a “cooling-off period.” He added that prices appear to be in the “beginnings of a correction,” but are not at washed-out levels.

As to where gold prices go from here, Baldwin said it is not entirely clear.

“Quite often when the risk-reward is balanced, it’s not particularly obvious that we need to go higher from here or lower … therefore from our perspective I wouldn’t say right now that we’re actually particularly bullish or particularly bearish,” he said.

Dennis da Silva, senior portfolio manager at Middlefield, said in the four years following Russia’s invasion of Ukraine in 2022, central banks “effectively doubled their annual purchases of gold” to diversify foreign reserves beyond the U.S. dollar.

“Underlying fundamental demand has been very supportive of gold, and I think it’s really why gold doesn’t go anywhere back to where it was three or four years ago,” da Silva said.

He thinks momentum will play a big part in where prices go.

“The next number to keep in mind is US$3,700 an ounce. If it breaks through that, I think the all-in bottom line price is probably US$3,400,” he said.

“To the upside, I think we would need it to recover and stick above US$4,300 before we could see the all clear to take it back to US$5,000. That’s my expectation over the next 12 months, is really to the US$5,000 mark.”

Canada’s benchmark stock index has one of the world’s highest concentrations of gold mining companies.

“Because these are commodity companies, any changes in the commodity prices will tend to affect all of them simultaneously,” said Dashwood.

He said mining companies with quality assets tend to perform better, even when commodity cycles turn.

“If you have good-quality assets, they can ride out multiple commodity cycles and generate value over time,” he said.

This report by The Canadian Press was first published July 5, 2026.

Daniel Johnson, The Canadian Press