Spot gold fell more than 2.5% on Monday, to a low of 2324.89 US dollars/ounce, falling more than 60 US dollars from a daily high. Investors' concerns about the Middle East conflict have eased, prompting them to cut back on safe-haven transactions and prefer riskier assets such as stocks. The question now is, how much room is there to the downside?

Spot gold is facing solid selling pressure after falling below $2,400 per ounce. Chantell Schieven, head of research at Capitalight Research, said in an interview with Kitco News that not only is gold technically overbought, but it has also begun a period of seasonal weakness in history. In this environment, she believes that the price of gold is likely to fall back to 2,150 US dollars/ounce, which is the breakthrough level of March.

However, although Schieven expects a pullback in gold in the next few months, she is still a long-term bully. She said that although the gold market still has room to decline in the summer, precious metals still have a solid foundation for a rebound before the end of the year. She raised her year-end price target for gold from $2,400 an ounce to $2,500.

At the beginning of this year, Schieven was one of the most bullish analysts participating in the London Bullion Market Association's annual price forecast. She said, “It's a bit surprising to see gold break through all of these levels. Although I think gold will rise, I really think we need to see a slight correction. I don't think gold will drop all the way back to $2,000 or less, but we might see $2,100 before the summer ends.

Schieven said that the main reason for her recent cautious attitude towards gold is changes in interest rate expectations, which support the rise in bond yields and the strengthening of the US dollar. Currently, the market is delaying the start of the Fed's easing cycle until after the summer. According to the CME FedWatch tool, the market believes the possibility of cutting interest rates in June is less than 20%. Meanwhile, the possibility of interest rate cuts in July has dropped below 50%.

“Gold has strayed a bit from its fundamental drivers, and I think we're starting to see these drivers come back into focus, which may be bad for gold,” she said.

However, Schieven added that the gold market has become more delicate than just following bond yields and dollar movements. Although the Federal Reserve is not expected to cut interest rates in the summer, it is unlikely to raise interest rates. Schieven said, “The Federal Reserve will eventually cut interest rates this year. I expect they will cut interest rates after the 2024 election, when we will see the price of gold rise and advance to $2,500 per ounce. For long-term investors, summer lows may be a good time to buy.”

Meanwhile, Schieven said she expects inflation to play a more critical role in gold price trends. She pointed out that since the Federal Reserve keeps its monetary policy unchanged, higher interest rates mean that real interest rates will rise, thereby reducing the attractiveness of gold as a non-profitable asset. But she said:

“At the end of the day, even if the Fed makes hawkish remarks, it will continue to leave room for itself to cut interest rates. They will cut interest rates even if the inflation rate remains stubbornly above the 2% target. Because the US government's debt level continues to rise, the Federal Reserve is unable to maintain high interest rates.”

Looking beyond US monetary policy, Schieven said she expects gold to remain an attractive safe-haven asset. Although the global economy has grown relatively better than expected so far this year, Schieven said she hasn't completely ruled out the threat of a recession.

She also said that the increase in US debt will stifle economic growth as more money is used to repay debts. In March of this year, Bank of America economists pointed out that US Treasury bonds increase by 1 trillion dollars every 100 days. Schieven pointed out that this is an important reason why central banks will continue to buy gold.

“Nobody wants our debt right now,” she said. “As debt grows, it's not surprising that central banks want fewer dollars and want to diversify their dollar holdings.”

Finally, Schieven said that as the 2024 US election approaches, US geopolitical instability will also provide new support for gold.

“I really don't know what to say, but both options (Biden and Trump) aren't that great. “Regardless of who is elected, the deficit will continue to rise and the dollar will continue to depreciate,” she said. “These things are bad for America, but they are definitely good for gold.”

Despite this year's high volatility, Schieven said gold is still in a long-term upward trend. She pointed out that in the 1970s, rising inflation, economic uncertainty, and geopolitical turmoil led to a doubling of the price of gold. While this may be unlikely to happen today, it is not entirely impossible.

In a recent report, Schieven wrote: “We believe it is unreasonable to expect the price of gold to reach more than $3,300 in the next 5-6 years.”