According to Philip Newman, managing director at Metals Focus, gold is unlikely to maintain its current $2,000 per ounce level in the long term unless the Federal Reserve communicates a clear pivot in its messaging. Gold prices surged following the banking turmoil and continue to trade well above $2,000 an ounce. However, Newman believes this trend will not persist into the second half of the year.

The current gold prices above $2,000 are driven by the market's perception of the Federal Reserve's interest rate policy, as well as safe-haven buying by retail and institutional investors amid uncertainty in Europe and issues with the Silicon Valley Bank and Credit Swiss. With the market pricing in rate cuts later this year, gold benefits from the dollar-negative connotations and the reduced opportunity cost of holding the precious metal.

However, the gold market remains highly sensitive to data releases from the U.S., and the next few readings are likely to counter market expectations that the Fed is ready to start lowering rates. In this scenario, gold prices can quickly drop. Newman is skeptical that gold will hold at its current level for long, as the market's expectations and the Fed's actual stance are currently at odds. He believes the market will move more towards the Fed's position in the second half of the year.

Newman predicts that the Fed will raise rates again and then maintain high rates long enough for heavy liquidations to emerge in the gold market, sending prices lower. If gold can hold above $1,900 for longer, it could limit the selling, but Newman still thinks the price will weaken considerably, possibly falling into the $1,700 range.

In the latter part of the year, weaker central bank gold demand and the market's realization that the Fed remains hawkish, which is more dollar-positive, will be the main factors driving gold prices lower. In the short term, there is enough momentum to push gold to new record highs, but for that to happen, the Fed must signal a shift in its stance. Until then, gold prices may continue to face downward pressure.