Gold prices have fallen to their lowest levels in two months as growing concerns over inflation and rising interest rates continue to weigh heavily on precious metals.
Spot gold dropped as much as 2% on Wednesday, briefly falling below AUD $4,400 per ounce, marking its weakest level since late March. Silver was also hit hard, sliding around 4% to near AUD $74 an ounce.
The latest weakness comes as tensions between the United States and Iran continue around the Strait of Hormuz, despite ongoing talk of a possible diplomatic agreement. Markets initially reacted with some optimism, but confidence appears to be fading as the conflict drags on.
Since the US Iran conflict escalated earlier this year, gold has lost around 15% from its highs. The closure risks surrounding the Strait of Hormuz have pushed oil prices sharply higher, fuelling fears of stubborn inflation across global economies.
Higher energy prices have also changed expectations for central banks, with traders now believing interest rates could stay elevated for longer or even rise further. That is typically negative for non yielding assets like gold and silver.
In the United States, traders are increasingly pricing in the possibility of another Federal Reserve rate hike before the end of the year. According to the CME FedWatch Tool, more than half the market now expects rates to remain unchanged or move higher, a major shift from earlier expectations for multiple rate cuts before the Middle East conflict intensified.
Although oil prices eased slightly during Wednesday trading, gold remained under pressure as investors focused more on inflation concerns than falling energy prices.
Federal Reserve officials have also reinforced the market’s cautious outlook. Minneapolis Fed President Neel Kashkari said inflation remains the central bank’s main concern, even while policymakers continue monitoring labour market conditions.
Technically, gold remains under pressure after breaking below key support levels. Analysts say the metal is trading beneath its 20 day moving average, with momentum indicators still sitting in bearish territory. If selling continues, gold could test support near AUD $4,350 an ounce in the short term.
Despite the recent correction, many major financial institutions remain bullish on gold longer term. Banks including JPMorgan Chase and Goldman Sachs continue to forecast gold prices eventually moving above AUD $5,000 an ounce as ongoing geopolitical tensions, debt concerns and central bank buying continue to support the broader market.
Even after the recent pullback, gold is still up around 4% for the year after reaching record highs near AUD $5,600 an ounce earlier in 2026.
