Spot gold prices experienced a sharp decline during the Asian trading session on Monday, June 8th, after initially touching $4,353 per ounce at the open. The price has since retreated below the $4,300 level, hitting a low of $4,268.42 per ounce as of 13:40, marking its weakest level since March 22nd. Market sentiment is being pulled in opposite directions by safe-haven demand and shifting expectations for US interest rates, leading to significant volatility in precious metals.
Despite escalating tensions in the Middle East briefly boosting demand for safe assets, stronger-than-expected US non-farm payrolls data has prompted a reassessment of the Federal Reserve's interest rate path, keeping sustained selling pressure on gold. The market's attention is now turning to upcoming inflation data.
Escalation Threatens Ceasefire Deal
In the early hours of Monday local time, the situation in the Middle East deteriorated sharply. Israel launched airstrikes against military targets in western and central Iran, in response to Iran's earlier missile attack. Iranian state media reported loud explosions in the capital Tehran, the major northwestern city of Tabriz, and the central city of Isfahan. Isfahan province hosts significant Iranian nuclear and military facilities, and the explosions in the area have raised deep international concern that the conflict could spread to nuclear sites.
Israel's airstrikes came just hours after Iran launched multiple waves of missiles into Israeli territory. Iran stated this retaliatory action was in response to an earlier Israeli military strike on the southern suburbs of Beirut, Lebanon. The Israeli strike on southern Beirut resulted in at least two deaths and over a dozen injuries, further intensifying cross-border hostilities between Hezbollah and Israel.
As Israel and Iran become locked in a cycle of attack and retaliation, the already fragile US-brokered ceasefire agreement faces the risk of total collapse. Persistent conflict since late February has already disrupted shipping through the Strait of Hormuz. The recent direct strikes on each other's territory mark a dangerous new phase in the regional situation.
Key Market Drivers: Rate Expectations and CPI
Following the non-farm payrolls report, markets have significantly repriced their expectations for Federal Reserve interest rates. Previously, the prevailing market view was that the Fed would hold rates steady or even cut them this year. However, the May data showing 172,000 new jobs, far exceeding expectations, has completely altered that outlook. Federal funds futures now indicate a nearly 73% probability of at least a 25-basis-point rate hike by year-end, a sharp increase from around 45% just one week ago. This dramatic shift reflects how a robust labor market is reshaping investor views on the monetary policy trajectory.
The market focus has now shifted to the May Consumer Price Index (CPI) report scheduled for release this week. The annual CPI rate for April unexpectedly came in at 3.8%, already above market forecasts. Influenced by recent sustained surges in energy prices, the market anticipates May's inflation rate could accelerate further to 4.2%. If the inflation data proves resilient again, it could reinforce the recent hawkish repricing in markets, potentially pushing the probability of a rate hike above 80%. Conversely, an unexpected slowdown in inflation could partially offset the rate hike expectations fueled by the jobs data, offering a respite for non-yielding assets like gold.
Given that the inflation side of the Fed's dual mandate is likely to dictate the next policy moves under the new chair, Kevin Warsh, gold remains in a vulnerable position as long as energy prices stay elevated. The continued closure of the Strait of Hormuz has pushed crude oil prices above $90 per barrel, with rising energy costs feeding into consumer prices via gasoline, electricity, and transportation. As long as the Middle East situation lacks substantive de-escalation, energy prices are unlikely to retreat significantly, implying persistent inflationary pressures. In this context, the Fed is more likely to be forced to maintain a hawkish stance. Gold, as a non-yielding asset, faces ongoing holding cost pressure amid rising rate expectations, leaving its short-term outlook bearish.
Institutional Perspectives
JPMorgan maintains a bullish medium-term view on gold, even though near-term demand weakness has led the bank to lower its full-year average price forecast for 2026. In May, the bank revised its 2026 gold price average forecast down to $5,243 per ounce from $5,708, primarily due to a temporary slump in both financial trading demand and physical gold allocation demand, which has weighed on price performance in the first half of the year. However, JPMorgan explicitly maintains its year-end upside target, projecting the gold price could climb to $6,000 per ounce by the end of 2026. The bank's analysts view the current weakness as a temporary phase, expecting allocation demand in the gold market to recover as macro uncertainties around energy and inflation are gradually digested.
Entering the second half of 2026, trading allocation demand from institutional investors and normalized gold purchasing demand from global central banks are expected to recover simultaneously, providing a dual boost for gold prices. JPMorgan further forecasts the average gold price for 2027 will rise to $6,263 per ounce, suggesting the current gold price uptrend cycle is not over. The bank's Head of Commodities Research, Natasha Kaneva, added that if the Strait of Hormuz reopens for transit in June, the Fed is more likely to hold rates steady. A subsequent decline in real interest rates would then support higher gold prices, and central banks would resume gold purchases. She predicts the gold price could reach $6,000 per ounce by year-end and $6,300 per ounce before the end of 2027.
Goldman Sachs remains firmly bullish. In its latest research report, the firm maintains its year-end 2026 gold price target of $5,400 per ounce, explicitly stating a structurally positive long-term view on gold prices while adopting a tactically cautious stance on short-term volatility.
Goldman's core bullish thesis focuses on the persistent, rigid demand for gold from global central banks. Data indicates central bank gold buying has continued to recover in 2026, with the monthly average purchase volume for the year expected to reach 60 tonnes, a significant increase from previous averages. Goldman analysts note that persistent global geopolitical uncertainty, urgent needs for asset diversification among central banks, and the steady progress of de-dollarization continue to reinforce gold's status as a core reserve asset, providing solid underlying support for prices. Additionally, with two more US rate cuts still expected this year, gold's medium-term outlook remains solid.
Technical Analysis
On the daily chart, spot gold is currently within a medium-term downtrend channel. Having retreated from its March high of $5,419.01 and after two rounds of adjustments, the price has now broken below $4,300, indicating a clearly weak overall trend. The moving average system shows a typical bearish alignment, with the price having fallen below the 20-day, 50-day, and 100-day moving averages. It is currently trading below the 200-day moving average (around $4,431.77), which, together with the previous trading platform, forms a strong short-term resistance zone. Key resistance levels above are situated near $4,516, $4,623, and $4,880.
Regarding technical indicators, the MACD shows bearish momentum is still being released, with the DIFF line continuing to run below the DEA line and the green histogram expanding, indicating the downtrend has not yet shown clear signs of exhaustion. The RSI reading is 33.29, approaching the oversold threshold of 30, suggesting significant short-term oversold conditions and the potential for a technical rebound. However, this has not yet formed a signal for a trend reversal.
In summary, gold is currently in a state of "bearish dominance with short-term oversold conditions." The break below $4,300 has opened further downside potential. Confirmation of a trend reversal would require signals such as a MACD golden cross or the RSI breaking above 50. Investors are advised to maintain flexible positioning ahead of next week's CPI data release and to monitor weekly closing prices for further guidance.
As of 13:44 Beijing time on June 8th, spot gold was trading at $4,288.92 per ounce.
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