Gold Crashes 2% as Rates Market Shifts Expectations

Gold's price plummeted by nearly 2% to $4,053 an ounce on Thursday as it fell below its previous session's close. This decline comes after the metal reached a two-week high of $4,138 just a day prior.

The sharp drop in gold prices was unexpected, given the geopolitical tensions in the region. The Houthi forces claimed missile and drone attacks on two Saudi oil tankers in the Red Sea, while the US continued its strikes on Iranian targets. These developments would normally drive up demand for safe-haven assets like gold.

However, the reason behind the decline lies in the rates market. Higher crude prices feed directly into headline inflation expectations, pushing the Federal Reserve further from easing and closer to tightening. The 10-year Treasury yield hit its highest level since January 2025 at 4.695%, increasing the likelihood of a rate hike.

The impact on gold has been significant, with the metal falling by over 27% from its all-time high of $5,602.23 set in January this year. The second quarter of 2026 was gold's worst in thirteen years, with June alone producing a 10.02% single-month decline.