Gold Prices Plummet 25 Percent as Interest Rate Expectations Soar

Gold prices have taken a hit, dropping 25 percent from its record high of $5,595 an ounce in January to $4,188 per ounce on June 12. This decline is attributed to the surprise strength of the US labor market, which intensified expectations of higher interest rates and pushed gold below its 200-day moving average for the first time in two and a half years.

The conflict involving Iran has also driven oil prices higher, fueling bets on rate hikes and dulling gold's appeal as a safe haven. According to Aakash Doshi, head of gold and metals strategy at State Street Investment Management, 'the market must first digest the risk of a Fed rate hike and a stronger dollar.'

Despite this decline, central banks continue to purchase gold, with the World Gold Council reporting that they bought a net 244 tonnes in the first quarter of 2026. The council estimates that geopolitical risk will keep both investors and central banks reaching for gold through 2026.

Nicky Shiels, head of metals strategy at MKS PAMP, expects prices to trade in a narrow range for the next few months until new catalysts appear. Meanwhile, Russell notes that rallies as strong as this have historically given way to long declines, citing the example of gold's 170 percent surge from 2008 to its then-record price in September 2011, followed by a 37 percent decline over the following seven years.