Gold (XAU/USD) fell to a six-month low on Thursday, erasing all gains recorded this year, as hawkish central bank expectations and technical selling pressured the market [1]. At the time of writing, XAU/USD traded flat around $4,060 after hitting $4,023 earlier in the day, marking its lowest level since November 2025 [1]. The precious metal is down about 25% since the US-Iran war began in late February and nearly 27% from its January record high near $5,600 [1].
The sell-off has been attributed to a shift in interest-rate expectations among traders, with the Mideast war pushing oil prices higher, stoking inflation concerns, and increasing pressure on major central banks, particularly the Federal Reserve, to tighten monetary policy or consider raising interest rates [1]. US inflation has nearly doubled since the outbreak of the war, rising from 2.4% in January to 4.2% in May, the highest reading since April 2023 [1]. Data released on Thursday showed the Producer Price Index (PPI) rose 6.5% year-over-year in May from 5.7% in April, above forecasts of 6.4%, while core PPI eased to 4.9% from 5.4%, below the 5.2% consensus [1].
As a result, traders are increasingly pricing in the likelihood of a Fed rate hike this year instead of the two rate cuts that were expected at the start of 2026 [1]. While gold is traditionally viewed as a hedge against inflation, higher interest rates tend to weigh on the metal because it offers no yield, making interest-bearing assets such as bonds more attractive [1].
Technically, the outlook remains bearish for gold, with XAU/USD extending its decline below the 200-day, 50-day, and 100-day Simple Moving Averages, which now act as a broad supply zone overhead [1]. The Relative Strength Index (RSI) on the daily chart is in oversold territory near 26, and the Moving Average Convergence Divergence (MACD) remains deeply negative, indicating strong but stretched downside momentum rather than a confirmed base [1]. Renewed hostilities in the Middle East, including Tehran downing a US Apache helicopter earlier in the week, have dimmed hopes for a near-term agreement and raised fears of prolonged disruptions through the Strait of Hormuz [1].
CONCLUSION
Gold's sharp decline to a six-month low reflects the market's shift toward a higher-for-longer interest rate outlook and ongoing geopolitical tensions. With technical indicators signaling continued bearish momentum and traders now expecting a Fed rate hike, the path of least resistance for gold remains to the downside.