The safe-haven trade that propelled gold to record highs earlier this year has suddenly unravelled. Two powerful headwinds—a historic Middle East peace accord and an unexpectedly aggressive turn from the Federal Reserve—have combined to send bullion tumbling. Gold settled at $4,172.90 per ounce on Friday, down nearly 1.3% on the day and roughly 8% over the past month, leaving it some 26% below its January peak.
The first shock came from Geneva. The United States and Iran signed a formal peace treaty on Friday, reopening the Strait of Hormuz and extinguishing the geopolitical risk premium that had been a key driver of gold demand for months. Investors promptly rotated out of haven assets into equities, while worries over global supply disruptions—a central pillar of the recent buying frenzy—evaporated almost overnight.
Compounding that shift was a hawkish surprise from the Federal Reserve. At the conclusion of its June 17 meeting, the FOMC, chaired by Kevin Warsh, held rates steady at 3.50% to 3.75% but delivered a far more restrictive outlook than markets had priced. Nine of the committee’s 19 members now expect at least one additional rate hike by the end of 2026, and the median fed funds projection for year-end rose to 3.8% from a previous 3.4%. All language hinting at future loosening was scrubbed from the official statement. The dollar surged to an eight-week high, raising the cost of gold for non-U.S. buyers and piling further pressure on the metal.
Should investors sell immediately? Or is it worth buying Gold?
Goldman Sachs was swift to respond. The bank slashed its year-end price target by $500 to $4,900 per ounce, citing fading hopes for rate cuts and weakening ETF demand. Data released over the past week backed that assessment: global gold ETFs saw net outflows of roughly $2 billion in May alone. While the structural support from central banks remains solid—net purchases totaled 244 tonnes in the first quarter of 2026—that steady buying has proved insufficient to offset the selling pressure in the futures market.
Technical indicators point to further downside risk. Gold now trades about 8% below its 50-day moving average and has slipped under the 200-day line, triggering additional sell orders from trend-following algorithms. The relative strength index sits at 35.4, nearing but not yet in oversold territory. The psychologically critical $4,000 mark now serves as the primary floor, while resistance clusters in the $4,330–$4,355 zone.
A potential catalyst lies ahead with Friday’s release of U.S. PCE inflation data. A hotter-than-expected reading would likely reinforce the Fed’s hawkish stance and add to gold’s misery. Traders are also mindful that last Friday’s thin liquidity, amplified by the Juneteenth holiday, may have exaggerated some moves. With U.S. participants back at their desks on Monday, the true test of whether the $4,000 support can hold will begin in earnest.
Ad
Gold Stock: Buy or Sell?! New Gold Analysis from June 20 delivers the answer:
The latest Gold figures speak for themselves: Urgent action needed for Gold investors. Is it worth buying or should you sell? Find out what to do now in the current free analysis from June 20.
Gold: Buy or sell? Read more here...