On Tuesday, May 19, the international gold market experienced a significant correction. Spot gold plunged over 1.8% in a single day, hitting a low of $4,464.85 per ounce, marking its lowest level in nearly seven weeks, and closed at $4,481.83 per ounce. This decline resulted from a combination of macroeconomic conditions, geopolitical risks, and policy expectations.
Specifically, rising real interest rates and a strengthening US dollar were the core factors suppressing gold prices. As a non-yielding asset, gold prices are highly inversely correlated with US Treasury yields. On May 19, the yield on the 10-year US Treasury note surged to 4.687%, reaching its highest level since January 2025, while the 30-year long-term bond yield climbed to 5.197%, setting a new 19-year high. The significant upward shift in the long end of the US yield curve directly increased the opportunity cost of holding gold, leading capital to flow back into fixed-income assets and significantly reducing gold's investment appeal. Simultaneously, the US dollar index rose 0.34% to 99.30, hitting a six-week high. For holders of non-US currencies, the cost of dollar-denominated gold increased, dampening both physical gold purchases and investment demand. The combination of a strong dollar and high yields once again became key drivers of the decline in gold prices.
Inflation concerns, coupled with geopolitical conflicts, created a dual bearish pressure. The ongoing US-Iran conflict in the Middle East intensified concerns over global oil supply, with US crude oil prices holding firmly above $100 per barrel. High oil prices quickly transmitted through global supply chains, pushing up core inflation levels and reigniting market fears of uncontrolled inflation. Although gold traditionally serves as a hedge against inflation, in the current high-interest-rate environment, central banks' policy focus on combating inflation takes precedence over safe-haven demand, temporarily overshadowing gold's inflation-hedging logic. Geopolitically, unresolved US-Iran negotiations and related statements from former President Trump have heightened uncertainty. While safe-haven demand should support gold prices, it has been offset by high-interest-rate expectations driven by oil prices, allowing bearish factors to dominate.
Shifting Federal Reserve policy expectations further dampened bullish sentiment. The market is awaiting the minutes from the Fed's April policy meeting. Current pricing indicates a 94.2% probability that the Fed will keep interest rates unchanged in June, with the likelihood of a rate hike in December rising to approximately 55%. Market expectations for rate cuts have generally been pushed back to 2027. The prospect of prolonged high interest rates continues to suppress the allocation appeal of gold as a non-yielding asset. Earlier expectations for accommodative policies that drove gold prices higher have largely dissipated, leading bullish funds to gradually exit and accelerating the pace of gold's correction.
Looking ahead, gold is likely to remain under pressure in the short term, while medium- to long-term structural opportunities persist. In the near term, as long as oil prices remain elevated and US Treasury yields stay high and volatile, the pressure on gold prices to adjust will persist. The $4,400 level is a key psychological support; if breached, prices could test lower levels. From a medium- to long-term perspective, the foundation for a gold bull market remains intact. Factors such as unresolved global geopolitical risks, continued gold purchases by central banks worldwide, and high global debt levels continue to provide support for gold.
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