The global gold market is undergoing a sharp correction. This decline is not an isolated event, but rather the combined result of a strong rebound in the US dollar, an unexpected easing of tensions in the Middle East, and a hawkish shift in Federal Reserve policy. Gold, once regarded as the ultimate safe-haven asset, is now facing pressure from multiple fronts.

The US Dollar Index surged on Tuesday, reaching its highest level in more than a year. This rally directly weighed on gold prices, with the hawkish signals delivered by the new Federal Reserve Chair during last week’s policy meeting becoming the key catalyst behind the market repricing. According to the CME FedWatch Tool, the probability of a December rate hike has jumped from 61% before the meeting to approximately 86%, while the probability of a July hike has risen significantly to 36.3%, and the probability of a September hike has climbed to 70%.

As a non-yielding asset, gold naturally comes under pressure in a high-interest-rate environment. When markets expect the Federal Reserve to tighten monetary policy more aggressively, the opportunity cost of holding gold rises rapidly. At present, the gold market is paying far less attention to developments in the Middle East and focusing instead on the Federal Reserve’s policy stance. Policymakers have emphasized that inflation risks remain elevated, and that the impact of higher tariffs as well as the potential disinflationary effects from easing Middle East tensions have yet to be fully confirmed, further reinforcing the Fed’s hawkish position.

Alongside the pressure from Federal Reserve policy, the unexpected easing of tensions in the Middle East has directly weakened gold’s appeal as a geopolitical safe haven. The United States and Iran have made substantial progress in their peace negotiations. Under the preliminary agreement, the United States has granted Iran a 60-day sanctions waiver, while tanker traffic through the Strait of Hormuz is gradually returning to normal. Three supertankers that had previously been stranded have already successfully passed through the Strait, while additional vessel transit plans are being coordinated through international maritime organizations.

These positive developments have significantly reduced market concerns over supply disruptions in the Middle East. As a result, the geopolitical premium that had previously accumulated in gold prices is rapidly fading.

The market’s attention is now turning to the release of the US May Personal Consumption Expenditures (PCE) Price Index on Thursday. As the Federal Reserve’s preferred measure of inflation, core PCE is expected to rise 0.3% month-on-month and 3.4% year-on-year, while headline PCE inflation could climb to 4.1% year-on-year. With the labor market remaining relatively stable, investors are focused on whether inflation remains elevated or begins to ease as external pressures subside. A stronger-than-expected PCE reading would likely reinforce expectations for additional rate hikes and create further downside pressure on gold.

Market Analysis:

Gold continues to trend lower on the 4-hour chart, with both the MACD lines and histogram expanding below the zero line. Overall, the current decline in gold is the result of multiple factors moving in the same direction. The Federal Reserve’s hawkish shift has strengthened the US dollar and pushed rate-hike expectations higher, while progress in Middle East peace negotiations has reduced the geopolitical risk premium. Together, these forces have contributed to the rapid decline in gold prices.