Gold Plunges as Fed Rate-Cut Hopes Fade After Hot Inflation Data

Gold prices suffered a sharp decline on Tuesday, falling $84 to $4,482 per ounce and hitting their lowest level since late March. The precious metal has now lost nearly 4% over the past week as rising U.S. inflation, a stronger dollar, and expectations of prolonged high interest rates continue to pressure the market.

The main trigger behind the selloff was stronger-than-expected U.S. inflation data, which pushed Treasury yields higher and significantly reduced expectations for Federal Reserve rate cuts in 2026. According to CME data, around 97.4% of traders now expect the Fed to keep interest rates unchanged within the 3.50%–3.75% range at its June meeting. Some fixed-income investors have even started pricing in the possibility of another rate hike before the end of the year.

Higher interest rates typically favor yield-bearing assets such as bonds, making non-yielding assets like gold less attractive to investors. At the same time, the strengthening U.S. dollar added further downside pressure, as a stronger greenback increases the cost of gold for international buyers and weakens global demand.

The LBMA Gold Price PM ended last week down 4.5% at $4,528 per ounce, reducing gold’s year-to-date gains to just 3.7%. This comes despite widespread expectations at the start of 2026 that gold would surpass the $5,000 level by mid-year.

Geopolitical tensions also failed to provide lasting support for bullion prices. The ongoing standoff between the United States and Iran had initially boosted safe-haven demand and lifted oil prices sharply. However, reports suggesting a potential diplomatic breakthrough temporarily removed part of the geopolitical premium from the gold market. Unconfirmed reports indicated that Washington could ease sanctions on Iranian oil exports while Tehran might agree to freeze its nuclear program for the long term.

That optimism quickly faded after President Donald Trump warned that Iran was running out of time to secure a deal, while Iranian state media reported that negotiations remain deadlocked. Meanwhile, recent attacks targeting energy infrastructure in the Persian Gulf, including a nuclear facility in the United Arab Emirates, have once again intensified regional tensions.

The surge in energy prices caused by disruptions around the Strait of Hormuz has also become a negative factor for gold by fueling inflationary pressures worldwide. Rising producer prices and consumer inflation have reinforced expectations that central banks will maintain hawkish monetary policies, a backdrop that historically weighs on non-yielding assets such as gold.

On the demand side, India added further pressure to the market by raising its gold import duty from 6% to 15%. The move aims to protect the country’s foreign exchange reserves and stabilize the weak rupee, but it also reduces physical demand from one of the world’s largest gold consumers.

Despite the current bearish momentum, some institutions remain optimistic about gold’s long-term outlook. The World Gold Council reported that global gold demand reached a record 1,230.9 tonnes in the first quarter of 2026, marking a 2% year-over-year increase. Demand for gold bars and coins surged strongly across Asia, while central banks also continued aggressive purchases.

J.P. Morgan analysts forecast that central banks could buy around 755 tonnes of gold this year and continue to maintain a price target of $5,000 per ounce by the end of 2026, with $6,000 viewed as a realistic long-term possibility.

For now, however, technical analysts believe the breakdown below the $4,600–$4,650 support zone could open the door for further declines toward the $4,423 and even $4,368 levels. Investors are now closely watching this week’s major economic releases, including the Federal Reserve meeting minutes, U.S. jobless claims data, and the University of Michigan inflation expectations report, all of which could shape the next move in the gold market.