Gold hits annual lows as sticky inflation fears, rate outlook weigh on prices

Spot gold fell 0.7% to $3,987.59 an ounce by 02:09 ET (06:09 GMT) on Tuesday, while gold futures declined 1% to $3,999.82/oz. Spot prices were down 12.8% in June, marking their worst monthly performance since 2008 and taking them to the lowest level since early November.

Fed rate expectations and inflation concerns pressure bullion

Gold’s decline was driven by a stronger U.S. dollar and growing conviction in markets that the Federal Reserve will raise interest rates at least once this year. The shift in expectations followed the central bank’s June meeting, during which it adopted a hawkish tone and several policymakers were seen calling for a hike.

A mix of high energy prices and disruptions linked to artificial intelligence contributed to market bets that inflation will remain sticky this year, increasing the likelihood of further monetary tightening by the Fed. Although energy prices have eased in recent weeks following a U.S.-Iran peace deal, uncertainty over the Middle East persisted after a flare-up in military tensions over the weekend.

Concerns over AI-driven inflation were intensified by Apple Inc raising prices on several devices last week due to higher chip costs. Similar moves by other electronics manufacturers, amid strong AI-related demand for chips, have tightened global chip supplies. Expectations of sticky inflation and higher rates have, in turn, weighed on gold and other non-yielding assets by increasing the opportunity cost of holding them.

Precious metals under pressure and OCBC forecast cuts

Other precious metals also registered sharp declines. Spot silver slid 1.4% to $57.4990/oz on Tuesday and was down 24.2% for June. Spot platinum fell 1% to $1,567.72/oz and was nearly 19% lower over the month.

OCBC revised down its precious metals outlook on Tuesday, citing the impact of high interest rates and broader macroeconomic conditions. The Singaporean bank cut its end-2026 gold price forecast to $4,360.0/oz from $5,100/oz and lowered its silver forecast to $67/oz from $89.5/oz.

The bank noted that the downgrade reflected a more challenging near-term macroeconomic environment rather than a complete reassessment of the longer-term case for precious metals. OCBC said the outlook for gold continues to be supported by central bank buying and fiscal uncertainty, but that growing expectations of rising U.S. interest rates have significantly weakened the near-term setup and dampened ETF demand.

FAQ

Why are gold prices at annual lows?
Gold prices have fallen to annual lows due to expectations of at least one additional Federal Reserve rate hike, a stronger U.S. dollar, and concerns that inflation will remain sticky, all of which increase the opportunity cost of holding non-yielding assets like gold.

How did gold perform in June?
Spot gold was down 12.8% in June, its worst monthly loss since 2008, and traded at its weakest level since early November.

How are other precious metals performing?
Spot silver fell 1.4% to $57.4990/oz on Tuesday and was down 24.2% for the month, while spot platinum declined 1% to $1,567.72/oz and was nearly 19% lower in June.

What changes did OCBC make to its precious metals forecasts?
OCBC cut its end-2026 gold price forecast to $4,360.0/oz from $5,100/oz and reduced its silver forecast to $67/oz from $89.5/oz, citing high interest rates and challenging macroeconomic conditions, while noting that long-term support from central bank buying and fiscal uncertainty remains.