Gold prices recorded the third consecutive declining session on Wednesday, with futures contracts losing 52.30 USD, equivalent to 1.13% - the lowest closing level in April and causing the precious metal to "evaporate" more than 230 USD compared to the peak set from the beginning of the year. Spot gold ended the session around 4,567 USD/ounce, marking the strongest week of decline since March.
The direct cause comes from a familiar but paradoxical factor: gold is under pressure from the inflation shock itself - which theoretically should support the price of precious metals.
Crude oil prices jumped 8.87 USD, equivalent to 8.9% on Wednesday - the third consecutive increase as US-Iran peace talks continue to fall into deadlock. President Donald Trump affirmed that any agreement must include Iran's acceptance of lifting its nuclear program, which Tehran still resolutely refuses.
In the context that the Strait of Hormuz is still almost closed to commercial energy flows, the supply shock is increasingly serious. WTI oil prices have surpassed the 100 USD/barrel mark again - for the first time since mid-April, while Brent oil closed at nearly 111 USD/barrel. The World Bank's (WB) Commodity Market Outlook report released this week forecasts that global energy prices could increase by 24% in 2026 - the largest annual increase since the Russia-Ukraine conflict in 2022.
For gold investors, the problem becomes harsh: High oil prices mean high inflation, and prolonged inflation causes interest rates to remain high - a factor that reduces the attractiveness of gold, which is not profitable.
The decision of the US Federal Reserve (Fed) on Wednesday further strengthens this interest rate outlook. The Federal Open Market Committee (FOMC) voted 8-4 to keep interest rates unchanged in the target range of 3.50% - 3.75%, with 4 members opposing it not because of keeping interest rates unchanged, but because they disagree with maintaining the downward trend in policy messages - a sign that a significant part is leaning towards a tighter stance.
At his last press conference as Fed Chairman, Jerome Powell acknowledged internal divisions but rejected the view that the Fed is moving closer to raising interest rates. He also congratulated his successor Kevin Warsh on the Senate review and approval process, and described the transition as "normal".
The failure to release new economic forecasts at this meeting has caused the market to focus maximally on Mr. Powell's speeches. The message is understood to be that the Fed is in a "frozen" state: unable to cut interest rates due to energy inflation, but also not ready to raise interest rates as growth risks still exist.
The decision to keep interest rates unchanged has supported the USD. The Dollar Index increased by 0.35% to 98.95 points, continuing the recovery momentum against major currencies. The strengthening USD puts direct pressure on gold as it increases holding costs for international investors, while the yield of 10-year US bonds remains around 4.4%, further increasing opportunity costs.
The combination of a strong USD and increased real yield created a classic "double pressure" on precious metals, and the trading session on Wednesday fully converged these two factors.
Despite short-term pressure, many financial institutions still maintain a positive long-term view of gold, although the forecast level is differentiated. Goldman Sachs believes that the current correction is mainly a position adjustment process, not a fundamental weakening, as buying power from central banks and long-term institutional investors remains.
JPMorgan maintains its target price of $6,300/ounce by the end of the year, based on the assumption of a gold buying demand of about 800 tons per year from the central bank and the trend of "restructuring the reserve system" leaving the USD.
Organizations such as Wells Fargo and Deutsche Bank also gave forecasts in the 6,000-6,300 USD range, while a Reuters survey of 30 experts showed a mid-range forecast of about 4,746 USD - close to the current level, implying that the market has reflected most of the long-term high interest rate outlook.
Goldman Sachs also quantified the impact of interest rates: Each 50 basis points cut from the Fed could support about 120 USD/ounce for gold prices. However, in the current context, this supporting factor is still only hypothetical.
Technically, the 4,300-4,400 USD/ounce zone is considered an important threshold, where many long-term investors can return to the market. The 200-day exponential line around 4,200 USD currently plays the role of a boundary between up and down trends since gold surpassed the 4,000 USD mark in October last year.
Currently, gold prices are "stuck" between two stories: One is a positive long-term foundation based on high public debt, the trend of dedollarization and the need to diversify central bank reserves; the other is a short-term macroeconomic environment, where inflation - a factor supporting gold - causes interest rates to remain high, reducing the attractiveness of precious metals.
Resolving this contradiction, likely through the cooling of oil prices or achieving diplomatic progress in the Strait of Hormuz, will determine whether the 4.567 USD/ounce mark is the bottom or just a stopping point before a deeper drop.
