Spot gold is currently consolidating near the support level of around $4,000 per ounce, and the gold options market suggests that prices may continue to trade in a range in the short term, according to State Street Asset Management.

The firm expects gold prices to hover slightly above $4,000 per ounce in the third quarter, with a potential breakout to the $4,500-$5,000 per ounce level between year-end and early 2027. This upward move is expected to be supported by strong demand for physical gold from China and continued gold reserve purchases by central banks in emerging markets.

State Street noted that after four consecutive months of negative returns from March to June, spot gold prices rebounded by 1% in July, though they remain down 6.3% year-to-date. Meanwhile, capital flows into gold funds are showing signs of gradual stabilization, indicating that investors are entering the market to buy at lower prices.

Additionally, the Federal Reserve kept interest rates unchanged at its July meeting, although three committee members voted in favor of a rate hike. State Street pointed out that the precious metals market has largely priced in the Fed's hawkish monetary policy stance. If the Fed maintains rates unchanged for an extended period, it could serve as a positive catalyst for further gold price increases.