Gold prices have plummeted to their lowest levels in three months, erasing all the gains seen since early 2024 following a sharp decline. Even as geopolitical tensions, inflation worries, and continuing uncertainty around US monetary policy dominate headlines, the decline in precious metals has renewed debate over gold’s role as a safe haven.
Safe haven status under scrutiny after sharp pullback
The latest market movement signals a reversal of the strong rally seen in both gold and silver in the first part of the year. According to analysis from Bull Theory, gold climbed to an all-time high of $5,600 per ounce on January 29. During the same period, silver surged as high as $121 per ounce.
In Bull Theory’s assessment, robust demand for safe haven assets had fueled gains in both gold and silver at the start of the year, but that trend reversed as market dynamics changed.
February brought heightened tensions between the US and Iran, sending oil prices to $93 per barrel after the Strait of Hormuz was threatened with closure, and pushing inflation to 3.8 percent. Under normal circumstances, such developments would provide support for precious metals; this time, however, the market moved in the opposite direction.
Spot gold recently traded near $4,327 per ounce at the close. The metal lost 3.3 percent in a single session, with a weekly drop exceeding 4 percent. Gold now stands around 18 percent below its January peak. The correction in silver has been even steeper, wiping out nearly all of the rally’s gains from the start of the year.
US data shifts rate cut expectations
A key factor in the latest downturn was stronger-than-expected US labor data. Official figures show the economy created 172,000 new jobs in May, surpassing expectations and reinforcing views of the US economy’s resilience.
This development prompted investors to trim bets on a near-term Federal Reserve rate cut. Some in the market have now begun to price in the possibility that rates may stay higher for longer. Assets like gold, which do not yield interest, tend to face increased pressure in high-rate environments.
Mini glossary: The Consumer Price Index is a key measure of inflation that tracks how prices for goods and services change over time. In the US, the release of CPI data can move assets like gold dramatically because it influences expectations for the Federal Reserve’s rate policy.
After the jobs data, US Treasury yields shot higher and the dollar gained against major currencies. A stronger dollar makes gold more expensive for international buyers, putting additional pressure on demand.
Market eyes June inflation data
Market participants are also closely watching signs of weaker physical demand from China. Data from the Shanghai Gold Exchange showed that buying activity dropped to its lowest since 2020. Meanwhile, local gold prices in India fell sharply, and Pakistan also saw significant daily declines.
Attention is now focused on the US inflation data to be released on June 10. Traders see the Consumer Price Index report as the next major trigger for gold prices. Should inflation remain elevated, expectations for prolonged higher interest rates could continue to weigh on the market.
