Gold prices have fallen to a two-month low: what happened
Reuters reports that gold prices have fallen.
Gold prices have fallen to a two-month low.
According to Reuters, on 28 May, the spot price of gold fell by 0.6% to $4,428.69 per ounce. US gold futures fell by 0.5% to $4,426.20.
The day before, Reuters also reported that gold had slumped to a two-month low due to expectations of tighter monetary policy to curb inflation.
Why is gold getting cheaper?
The main reason is that investors are once again assessing the risk of high interest rates in the US.
When interest rates rise or remain high for a long time, gold usually loses some of its appeal. It does not generate interest income, so investors tend to switch to assets that offer a yield.
Inflationary risks are creating additional pressure. The US Personal Consumption Expenditures price index rose by 3.8% in the 12 months to April. This complicates the Fed’s decision on future interest rates.
The role of the war with Iran
The market is also being affected by the situation surrounding Iran.
War and risks to energy supplies have already pushed up oil prices and heightened inflationary expectations. For gold, this creates a mixed effect: geopolitical tensions may support demand for a ‘safe haven’, but high inflation is fuelling expectations of a tighter Fed policy, which is weighing on the metal.
Reuters reported that gold has come under pressure precisely because of inflationary risks and rate expectations, whilst investors are monitoring the progress of negotiations between the US and Iran.
Can gold recover?
After falling to a two-month low, gold has partially recouped its losses.
Reuters reported that prices rose by more than 1% following news of a possible extension of the ceasefire between the US and Iran. Spot gold rose to $4,504.07 per ounce, whilst US futures settled at $4,532.40.
In other words, the market remains highly sensitive to two factors: news from the Middle East and signals from the Fed regarding interest rates.
What is the outlook?
If inflation in the US remains high, the Fed may maintain a tight policy for longer or discuss raising rates again. This could limit gold’s growth.
At the same time, geopolitical uncertainty and demand for safe-haven assets could support prices.
The World Bank previously forecast that average precious metal prices could rise by 42% in 2026, partly due to geopolitical uncertainty and demand for safe-haven assets.
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