Key Highlights

  • Gold fell more than 3% to below $4,000 per ounce, its lowest since November 2025, with the metal now down roughly 5% year to date and nearly 20% below its January record high reached before the Iran conflict.
  • Markets are pricing approximately a 68% probability of a Fed rate hike in September, up sharply from 29% a week earlier, raising the opportunity cost of holding non-yielding assets including gold.
  • Despite sustained geopolitical uncertainty from the Iran war, gold has failed to retain its traditional safe-haven function as inflation-driven central bank tightening across major economies has dominated price direction.

Gold prices fell more than 3% to below $4,000 per ounce on Wednesday, reaching their weakest level since November 2025, as a combination of dollar strength and rapidly shifting Fed rate expectations drove institutional selling across the precious metals complex.

The September rate hike probability shift is the dominant near-term driver. Markets moved from pricing a roughly 29% chance of a Fed rate increase a week ago to approximately 68% on Wednesday, a repricing that directly increases the opportunity cost of holding gold, which generates no yield and therefore becomes less attractive relative to interest-bearing alternatives as rate expectations rise.

The dollar's continued strength compounds the pressure. A stronger greenback makes gold more expensive in other currencies, reducing demand from non-US buyers and adding a second mechanical downward force on top of the rate expectations headwind. Gold's approximately 20% decline from its January record high, reached ahead of the Iran conflict's outbreak, reflects a market that initially priced the war as a sustained safe-haven catalyst but has progressively unwound that premium as inflation-fighting monetary policy tightening emerged as the more dominant macro force.

The failure of geopolitical uncertainty to sustain gold's safe-haven premium marks a notable structural shift in the metal's market behaviour during the current cycle. Iran war-related supply disruptions fuelled inflation that prompted central banks globally to adopt more restrictive stances, creating a monetary policy environment that has actively worked against bullion even as the geopolitical risks that traditionally support it remained elevated.