Gold prices experienced a significant decline on Wednesday, with spot gold trading 2.1% lower at around $4,170 during the European session according to FXStreet [1], and 2.4% lower at $4,161.63 an ounce by 7:05 a.m. ET as reported by CNBC [2]. U.S. gold futures also fell 2.2% to settle at $4,194.90/oz [2]. The drop in gold was accompanied by declines in silver and bitcoin, with spot silver down 2% to $64.01/oz and bitcoin losing 1.3% to $61,049.25 [2]. Stocks and funds linked to precious metals, including ProShares Ultra Silver ETF (-2.8%), iShares Silver Trust ETF (-1.4%), First Majestic Silver (-3.8%), and Hecla Mining (-3.1%), also traded lower [2].
The selloff in gold was triggered by a combination of geopolitical and macroeconomic factors. Iran announced that negotiation terms with the United States towards a permanent peace deal have returned under review following attacks by Washington’s Central Command (CENTCOM) [1]. CENTCOM confirmed launching attacks on Iran’s air defense and radar sites near the Strait of Hormuz, a critical passage for global energy supply [1]. This escalation has raised fears of a prolonged closure of the Hormuz, which could keep oil prices elevated and reinforce inflation risks [1][2].
Market participants are increasingly focused on inflation and the Federal Reserve's interest rate path. Ewa Manthey, commodities strategist at ING, noted that the escalation in the Middle East is pushing oil higher and lifting inflation risks, which is reinforcing expectations that central banks will maintain tighter policies for longer [2]. Money markets are pricing in a 98.2% chance that the Fed holds its key interest rate steady at its upcoming FOMC meeting, but traders now see a roughly 40% chance of a hike by October [2]. The European Central Bank (ECB) is also expected to raise rates by 25 basis points at its meeting on Thursday [2].
Technical analysis from FXStreet indicates that XAU/USD is trading well below the 20-day Exponential Moving Average (EMA) at $4,449, reinforcing a downside bias. The 14-day Relative Strength Index (RSI) around 27 suggests oversold conditions, but selling pressure remains [1]. Immediate support is seen at the six-month low of $4,100, with further downside risk to $4,000 if this level fails to hold [1]. Analyst commentary from CNBC highlights that metals remain vulnerable unless there is a clear shift lower in yields or softer U.S. inflation data [2].
Forward-looking statements from analysts suggest that the dominant driver for gold and silver is the macro environment, with higher yields and a more hawkish rate outlook outweighing safe-haven demand. Raj Abrol, CEO of Galytix, emphasized that tightening credit conditions and a firmer dollar are raising the cost of capital, impacting metals markets quickly [2]. Investors are awaiting the U.S. Consumer Price Index (CPI) data for May, which will be published at 12:30 GMT, for further cues on inflation and monetary policy [1].
CONCLUSION
Gold and other precious metals are under intense selling pressure due to rising rate hike expectations and heightened geopolitical tensions in the Middle East. The market is prioritizing macroeconomic factors, particularly inflation and central bank policy, over safe-haven demand. Near-term vulnerability persists for metals unless yields decline or inflation data softens, with immediate support for gold seen at $4,100.