Gold is trading near its lowest level since late March while silver slips below $75 an ounce as rising oil prices, renewed Iran-US military exchanges, and a 60% probability of a US rate hike by year-end weigh on precious metals in the first June session

Key Highlights

  • Gold is trading down 1.64% at $4,466.77 per ounce, approaching its lowest level since late March, as the first June session opens on a cautious note.
  • Silver is off 0.71% at $74.707, remaining well below its two-month peak of $89.40 recorded in mid-May.
  • Renewed Iran-US military exchanges and Iran's suspension of diplomatic communications have lifted oil prices, intensifying Inflation concerns.
  • Market Participants now assign approximately 60% probability to at least one US rate hike before year-end, a shift that weighs directly on non-yielding Assets.
  • Former Federal Reserve Chair Jerome Powell, in his first public remarks since his term ended on May 15, cautioned against the risks of a politically influenced Central Bank.

A Difficult Opening to June for Precious Metals

Gold and silver are both trading lower on Monday, surrendering early session gains as a combination of macroeconomic repricing and geopolitical developments works against the near-term case for precious metals. Gold is hovering near $4,466 per ounce, a level that places it close to its weakest point since late March, while silver is holding just below $75, a considerable distance from the $89.40 high reached in mid-May.

The immediate pressure point is the sharp rise in Crude Oil prices following reports that Iran has suspended the exchange of documents with Washington through diplomatic intermediaries, a decision framed as a protest against Israeli military operations in Lebanon. With WTI futures up nearly 8% and Brent approaching $97, the energy price surge is feeding directly into inflation expectations, and by extension, into market assumptions about the path of US Monetary Policy.

Rate Hike Probability Reshapes the Metals Calculus

The transmission mechanism from rising oil to lower gold is well established. Higher energy costs broaden inflationary pressure across the economy, reducing the likelihood that the Federal Reserve will cut rates and raising the probability of a more restrictive policy stance. In Monday's session, traders are pricing in approximately a 60% chance of at least one rate hike by the end of the year, a meaningful shift from the rate-cut expectations that had provided a supportive floor for gold pricing in recent months.

Gold and silver are non-yielding assets. When the Opportunity cost of holding them rises alongside Interest Rate expectations, Capital tends to rotate toward Yield-bearing instruments. The current repricing of Fed expectations is doing precisely that, compressing the Valuation Premium that geopolitical uncertainty had helped build into precious metals over the preceding weeks.

Powell's Remarks and Institutional Credibility

Adding a layer of complexity to the monetary policy backdrop, Jerome Powell made his first public comments since his term as Federal Reserve Chair concluded on May 15. Powell cautioned against the dangers of a central bank that becomes subject to political influence, a statement that carries relevance in the current environment where questions about the Fed's institutional independence have gained traction in policy circles.

For gold markets, the credibility of central bank mandates matters in a specific way. A Fed perceived as politically constrained is one that may tolerate inflation for longer, which historically supports gold prices. Conversely, a Fed that maintains its independence and acts firmly on inflation is one that keeps real rates elevated, which suppresses them. Powell's remarks appear aimed at reinforcing the former scenario, though markets have so far responded more to the rate hike probability than to the independence signal.

Jobs Data and Fed Speakers in Focus

Investor attention this week will centre on the upcoming US nonfarm payrolls report and scheduled remarks from Federal Reserve officials, both of which have the potential to recalibrate rate expectations further. A stronger than expected labour market reading would likely reinforce the rate hike narrative and maintain pressure on gold and silver. A softer print could provide some relief, though the inflationary impulse from elevated oil prices would continue to complicate any dovish pivot in market thinking.

Until the ceasefire framework between Iran and the US shows more concrete signs of progress, energy-driven inflation risk is likely to remain a persistent headwind for precious metals valuations.