Gold prices dropped sharply on Tuesday, with spot gold losing 1.9% to settle at $4,110.11 per ounce and gold futures falling 1.8% to $4,129.00 per ounce. The decline was attributed to a stronger U.S. dollar, whose index rose to levels not seen since mid‑May 2025, and to growing market expectations of Federal Reserve rate hikes. The Fed’s latest Summary of Economic Projections (SEP) was markedly more hawkish than anticipated, showing that at least half of the Federal Open Market Committee participants now foresee interest‑rate hikes this year. The dot‑plot now projects at least one quarter‑point rate increase in 2026, reversing earlier expectations of two quarter‑point cuts. New Fed Chair Kevin Warsh, appointed at the most recent FOMC meeting, announced the formation of five task forces to examine core monetary‑policy operations. According to the CME FedWatch tool, the probability of a quarter‑point hike at the July policy meeting rose to over 36% from 8.5% a week earlier, and expectations for a similar move at the December meeting have also risen.
Higher‑rate environments typically depress non‑yielding assets such as gold and bolster the dollar, reinforcing the price drop. Deutsche Bank analyst Michael Hsueh revised his outlook, setting a base‑case price of $4,800 per ounce for Q4 2026, while a risk‑case scenario involving three to four Fed hikes could push gold down to $3,800 per ounce. Hsueh noted that Fed repricing combined with resilient U.S. macro data has been the primary driver of the recent gold weakness, and that market‑based inflation expectations are declining alongside falling oil prices.
The article also referenced unrelated geopolitical commentary: President Donald Trump claimed that Iran had agreed to “fully and completely” unlimited nuclear inspections and pledged to keep the Hormuz Strait open, while U.S. Vice President JD Vance said peace talks in Switzerland resulted in Iran inviting IAEA inspectors. Iran’s state media, via spokesperson Esmaeil Baqaei, denied any such arrangement. The piece was contributed by Ayushman Ojha and Jaiveer Shekhawat.