International precious metals markets faced significant selling pressure on Wednesday, with gold prices slipping below the $4,000 mark to hit their lowest level since last November. Silver performed even weaker, plummeting over 6% in a single day to touch a six-month low. As of press time, spot gold was quoted at approximately $3,998, down nearly 3%, while spot silver stood at around $57, falling more than 6%. Market analysts identified the strengthening U.S. dollar, rising expectations of Federal Reserve rate hikes, and easing geopolitical tensions in the Middle East as the primary drivers behind the decline.
As investors reassess the Federal Reserve's future monetary policy trajectory, the safe-haven and inflation-hedge narratives that previously supported gold and silver are weakening. Although the Fed maintained interest rates at its June meeting, the latest dot plot indicates that most committee members support at least one rate hike within the year. The Fed Chair reiterated post-meeting that restoring price stability remains the paramount policy objective. Consequently, the market has reinforced expectations for higher rates for longer, with traders generally betting the Fed could resume hiking as early as September. Against this backdrop, the U.S. Dollar Index climbed to near 101.8, reaching its highest level since May 2025. Since precious metals generate no interest income, rising rates diminish their attractiveness relative to bonds and cash equivalents, increasing pressure for capital outflows.
Beyond monetary policy factors, easing tensions in the Middle East have also dampened safe-haven buying for gold. In previous months, the risk of a potential closure of the Strait of Hormuz had driven international oil and gold prices higher simultaneously. However, following a memorandum of understanding between the U.S. and Iran and the gradual normalization of strait transportation, market concerns regarding supply disruptions have significantly declined. Shipping data indicates that an increasing number of oil tankers are passing through the Strait of Hormuz, and crude export volumes continue to rebound. Affected by this, international oil prices fell sharply for consecutive sessions, with Brent crude dropping about 3.8% and WTI crude slipping to near $70. The decline in oil prices suggests diminishing concerns about energy-driven inflation, which also reduces the configuration demand for gold as an inflation-hedging asset. Nevertheless, energy researchers caution that global crude inventories remain at relatively low levels, and the drop in oil prices does not imply the energy market has fully normalized.
Gold prices have cumulatively retreated by over $1,600 from their historical highs. At the end of January this year, spot gold reached a record high of $5,594. However, amidst a reversal in Fed policy expectations, a strengthening dollar, and cooling safe-haven demand, gold prices have since continued to fall, with a decline approaching 30%. Facing a deteriorating short-term environment, several international investment banks have recently lowered their gold price forecasts. Following Goldman Sachs, UBS, and Deutsche Bank, ING also recently lowered its gold expectations for the coming quarters, projecting the average gold price to reach $4,300 in the third quarter of 2026 and $4,600 in the fourth quarter, respectively lower than the previous forecasts of $4,850 and $5,000. Institutions stated that while they remain bullish on gold in the long term, a strong U.S. dollar and high-yield environment will continue to exert significant pressure on gold prices in the short term.
From a technical perspective, gold has entered a critical support region. Market analysts believe the $3,950 to $4,000 range is currently the most key technical defense line for gold. If gold prices effectively break below $3,950, the next stage could see further probes into the $3,850 region; if market sentiment continues to deteriorate, a retreat to the $3,800 level cannot be ruled out. Meanwhile, the $4,000 mark has transformed from a previous key support level into a short-term resistance level. Compared to gold, silver performed even more weakly on Wednesday, with spot silver once dipping to near $55, hitting its lowest level since December 2025. Analysts pointed out that silver possesses dual attributes as both a precious metal and an industrial metal. Therefore, it is not only affected by the strengthening dollar and rising rate hike expectations but also faces pressure from slowing industrial demand expectations.
Looking ahead, market focus will shift to the U.S. May Personal Consumption Expenditures (PCE) Price Index released on Thursday. As one of the inflation indicators closely monitored by the Federal Reserve, this data will directly influence market judgments regarding the future rate hike path. Analysts generally believe that if the data continues to show inflation pressure higher than expected, market bets on Fed rate hikes could intensify further. The U.S. dollar and Treasury yields are also expected to continue rising, thereby forming new pressure on gold and silver. Currently, the biggest challenge facing the precious metals market is no longer geopolitical risk, but rather constantly strengthening expectations of hawkish monetary policy. Market participants are closely monitoring subsequent changes in the Fed's policy direction.
