Gold has been under persistent pressure this week as markets digest two simultaneous macro shifts. The Federal Reserve, under new Chair Kevin Warsh, left its policy rate unchanged at the June 18 meeting but the dot plot revealed nine officials now expect a rate hike by the end of 2026. Warsh stressed that inflation has remained above the 2% target for several years and reaffirmed the Fed's commitment to restoring price stability.
Higher interest rates increase the opportunity cost of holding non-yielding assets like gold. The US dollar strengthened on the hawkish signal, adding further downward pressure on the precious metal. Gold is now trading roughly 25% below its January all-time high of $5,595/oz.
On the geopolitical front, the safe-haven premium that supported gold since late February is unwinding. Both the US and Iran confirmed they intend to sign an agreement to suspend hostilities and restore energy trade as early as Friday. Markets are pricing a gradual normalization of Middle East shipping routes through the Strait of Hormuz, which had been effectively closed since military action began on February 28.
The World Gold Council's latest data shows Q1 2026 total gold demand, including OTC, rose 2% year-on-year to 1,231 tonnes. However, investment demand now far exceeds fabrication. Bar and coin demand remains strong, but jewellery demand dropped sharply: China fell 31% to 85.2 tonnes and India slipped 19% to 66.1 tonnes in the quarter.
Gold buyers should expect continued near-term volatility as rate expectations and geopolitical developments compete for market attention. The retreat from January highs offers better entry points for strategic hedging, but buyers should watch for the Fed's next move. If rate hikes materialize, gold could test $4,000 support. If cuts come later in 2026, the long-term bullish case remains intact per J.P. Morgan's $6,000 year-end target.