The French bank’s latest assessment marks a sharp retreat from its August optimism, when analysts projected gold reaching $5,000. The macroeconomic landscape has shifted as gold’s negative correlation with oil prices returned. As crude costs climb, markets are pricing in more aggressive Federal Reserve interest rate hikes, which inherently diminish the appeal of non-yielding assets like gold.

Bernard Dahdah, a precious metals analyst at Natixis, identifies the Federal Reserve’s monetary policy as the primary driver of current volatility. Beyond rate expectations, the metal is facing additional headwinds from rising bond yields and a strengthening U.S. Dollar Index. While physically backed ETFs have seen inflows despite the price dip—a rare market divergence—this buying pressure remains insufficient to offset the broader repricing triggered by higher rates.

The bank’s base-case scenario projects gold sliding to $4,100 by year-end as the Federal Reserve maintains a hawkish stance. A more severe bear case, triggered by a potential closure of the Strait of Hormuz, could push prices down to $3,500. Under this outcome, soaring oil prices would force central banks to pivot from gold accumulation to liquidating reserves to defend their respective currencies. Conversely, should geopolitical conditions stabilize and oil prices collapse, disinflationary pressures could provide the Federal Reserve room to pivot, potentially lifting gold prices above $5,250 an ounce.