On June 25th, ATFX reported: During the conflict between the United States and Iran, gold did not rise but instead fell; following the conflict, gold's decline was among the most pronounced. On March 2nd, the first trading day after the U.S.-Iran conflict began, gold opened at $5,374. On June 17th, when the U.S. and Iran completed the signing of a memorandum of understanding, gold closed at $4,257. Throughout the entire period of the Russia-Ukraine conflict, gold has cumulatively fallen by $1,117, far exceeding market expectations.
Gold possesses safe-haven attributes, but its failure to rise and instead fall in the face of Middle Eastern issues indicates that the current gold price above $4,000 has severely overextended market confidence. After the U.S. and Iran signed the memorandum, gold's decline rapidly accelerated. Yesterday, gold fell sharply again, touching a low of $3,959, breaching the $4,000 threshold. This decline is attributed on one hand to the fading of safe-haven sentiment impacting the gold price, and on the other hand to the fact that expectations for Federal Reserve interest rate hikes have not cooled significantly despite the drop in international oil prices.
Analyzing the Fed's Path
The chart shows the Federal Reserve's June interest rate decision dot plot. Although Federal Reserve Chair Wash and Treasury Secretary Besant are not optimistic about the practical value of the dot plot, its significance for interest rate guidance is substantial. For the 2026 interest rate forecast, nine committee members support a rate above 3.75%, meaning at least one more rate hike. With a total of 18 voting members, the proportion supporting a hike is relatively high. For the 2027 interest rate forecast, eight members support a rate above 3.75%, one fewer than in 2026, suggesting that U.S. rate hikes are only a temporary measure, not a long-term trend. The significant downward shift in the interest rate focus for 2027 and 2028 implies a future long-term trend favoring accommodative monetary policy.
Inflationary Pressures Persist
The chart displays the annual rate of the U.S. core PCE price index. Since December 2025, the PCE annual rate has shown a trend of rapid increase, driven by conflict between the U.S. and Iran in the Middle East. High crude oil prices have not only pushed up consumers' energy costs but have also indirectly increased transportation costs for most consumer goods. Although the U.S. and Iran signed a memorandum of understanding on June 17th, the passage of commercial oil tankers through the Strait of Hormuz has been less than expected. While international oil prices have fallen below $70, the decline in U.S. gasoline and diesel prices remains relatively small. Trump has even directed the U.S. Department of Justice to conduct compliance checks on U.S. diesel suppliers. This indicates that even after the U.S.-Iran conflict ends, the underlying high inflation problem in the U.S. will not dissipate quickly. This is the core reason leading market participants to expect the Federal Reserve to implement one more rate hike by the end of this year.
Gold has safe-haven properties, but this attribute is weakened due to its high price. The U.S. dollar index is likely to benefit from expectations of Federal Reserve rate hikes and may strengthen in the second half of the year. Gold's breach below the $4,000 psychological level means market quotes are significantly lower compared to the first half of the year, but this does not signal the arrival of a buying opportunity. Neither the monetary policy landscape nor the safe-haven attribute provides a signal for a reversal. At this stage, maintaining a bearish view based on the continuation of technical trends is more appropriate.
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