Gold and Silver Down on Rate Hike Fears

 

Gold and Silver Down on Rate Hike Fears

(Bullion News Network) – Gold and silver prices retreated on Thursday, continuing a pullback that began Wednesday following the Federal Reserve’s June meeting. The spot price of gold shed more than $44 per troy ounce. Silver lost a larger percentage, pulling back by over $2 per troy ounce to fall below the $66/ozt line. The price action favored gold, driving the gold-silver ratio more than 1.4% higher.

On Wednesday, the FOMC voted unanimously to keep interest rates unchanged. The committee also removed “forward guidance” language from its official statement, signaling an increasingly hawkish stance by the central bank. Faced with sticky inflation and a strong American labor market, the Federal Reserve is widely expected to raise interest rates at least once in 2026.

CME FedWatch projects a 39.6% probability that the FOMC will vote to raise interest rates at its July meeting. By the end of the year, CME Group estimates the overall odds that the FOMC raises rates by 25 basis points or more at 86.2%. Safe haven assets like gold and silver tend to inversely correlate with movements in the federal interest rate, with rate cuts often driving demand for precious metals higher.

Rate cut speculation played a major role in gold’s historic price run throughout 2025, so this is something traders will be paying close attention to over the next few months.

During the post-meeting press conference on Wednesday, Federal Reserve Chair Kevin Warsh told reporters that the June decision reflects a move away from so-called “forward guidance.”

You might have already noticed something: a difference in today’s policy statement. It’s a bit shorter, a bit simpler – and it dispenses with some older language. The statement just gives you the facts, as best we can judge it. Absent, also, is so-called “forward guidance,” which we agreed was not well-suited to the current policy conjuncture.

Interest rate speculation has emerged as a leading indicator in the precious metals market after taking a backseat to geopolitical stressors for months. The US-Iran war erupted at the end of February, driving crude oil futures higher and sparking concerns of a protracted oil crisis. With the Fed in a holding pattern for the first two quarters of 2026, traders were much more focused on tensions in the Middle East.

Markets diverted their attention to interest rates this week after the United States and Iran signed a preliminary peace deal. The agreement will reopen the Strait of Hormuz, end the U.S. naval blockade of Iranian ports, unfreeze Iran’s assets, and provide $300 billion in rebuilding and development funds to Tehran. Iran’s nuclear program will be negotiated between the U.S. and Iran at a later date.

Crude oil futures immediately fell on the news Thursday, retreating nearly to pre-war levels. Wall Street rallied in response, with major markets closing higher on optimism following the peace deal and declining oil prices.

Analysts warn that the US-Iran deal is far from guaranteed, though. The deal calls for an end to all fighting between the U.S., Iran, and their respective allies. Israel continued strikes in Lebanon during its war with Iran-backed Hezbollah on Thursday, which could potentially imperil the ceasefire. U.S. President Donald Trump encouraged Israel to abide by the terms of the agreement in a Truth Social post.

The United States is committed to PEACE, and we encourage everyone in the Middle East Region to maintain their commitments to allowing out negotiations to beautifully unfold. The Markets are loving what is happening with Oil Prices way down, and Stocks way up. We expect a complete Ceasefire on all fronts, including Lebanon, Hezbollah, and Israel.

For now, though, interest rate speculation is the big force driving markets in the United States.

Next week, traders will be able to review a fresh Personal Consumption Expenditures (PCE) report for the month of May. This data should give markets a better idea of where inflation may be heading in the United States. If these numbers are surprising, it could have an impact on how the FOMC responds at its July meeting. As it stands, persistent inflation above the Fed’s longstanding 2% target and a flourishing labor market suggest that the central bank may be prepared to raise interest rates.

Scheduled for release next Thursday, the May PCE could drive prices in the precious metals market as traders look forward to several upcoming FOMC meetings. In the longer term, investors should expect speculation surrounding interest rates to play a major role in driving demand for safe haven assets like gold and silver.