Gold fell to roughly $3,995 in early Asian trading Thursday, breaking the $4,000 mark for the first time since November 2025 as higher interest‑rate expectations and a stronger dollar exerted pressure. Market participants are now focused on the U.S. May Personal Consumption Expenditures (PCE) report due later in the day.
Traders have increased their expectations for additional Federal Reserve rate hikes this year, following the central bank’s hawkish stance at the June meeting and ongoing concerns about inflation triggered by the Iran conflict. Gold, which typically serves as an inflation hedge but offers no yield, becomes less appealing when borrowing costs rise.
According to the CME FedWatch tool, the market now assigns a 34.2% probability to a 25‑basis‑point increase at the July meeting (up from 8.5% a week earlier) and a 66.4% chance of a hike in September (up from 29.1%).
Gold is clearly moving in tandem with rising U.S. rate expectations, as Federal Reserve Chair Kevin Warsh’s emphasis on inflation heightens the prospect of a more aggressive monetary policy, noted Darwei Kung, head of commodities at DWS Group.
Traders are closely watching the U.S. May PCE data—the Fed’s preferred inflation gauge—released later Thursday, seeking further signals on monetary‑policy direction. If the report shows easing price pressures, the dollar could weaken, offering some upward support to the USD‑priced metal.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe‑haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the U.S. Dollar and U.S. Treasuries, which are both major reserve and safe‑haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell‑offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe‑haven status. As a yield‑less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the U.S. Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.