Gold and silver prices fell sharply on Tuesday as concerns over higher interest rates and a broad sell-off in technology stocks dampened investor appetite for precious metals.
Gold futures dropped 1.5 percent to US$4,142 per ounce, while silver futures fell more than 5 percent to US$61.80 per ounce before recovering some ground to settle near US$62.25 per ounce.
The declines came as investors reassessed the outlook for U.S. monetary policy following a more hawkish stance from the Federal Reserve, raising expectations that interest rates could rise further before the end of the year.
Market sentiment was also affected by weakness in global technology stocks, with the sell-off spreading across asset classes and prompting investors to reduce exposure to commodities, including precious metals.
Gold, traditionally viewed as a safe-haven asset during periods of geopolitical uncertainty, has faced increasing pressure in recent months despite ongoing tensions in the Middle East.
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Since the outbreak of the U.S.-Iran conflict in February, the precious metal has struggled to maintain the strong momentum that previously drove prices to record highs. Analysts say investors are increasingly focusing on interest rate expectations rather than geopolitical risks when assessing the outlook for gold.
The latest pressure followed last week’s Federal Reserve meeting chaired by Kevin Warsh, which was viewed by markets as more hawkish than expected. The meeting strengthened expectations that policymakers could raise interest rates later this year if inflation remains elevated.
Higher interest rates tend to reduce the appeal of gold because the metal does not generate interest or dividend income. As returns on cash and fixed-income investments rise, investors often shift funds away from non-yielding assets such as gold.
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Silver, which is influenced by both investment demand and industrial activity, experienced even steeper losses as traders reacted to the changing interest rate outlook.
The market reaction also reflects a shift in sentiment among major financial institutions, several of which have recently lowered their forecasts for gold prices.
Analysts at Bank of America said their previous projection that gold could reach $6,000 per ounce now appears less likely, citing persistent inflation concerns that could lead to tighter monetary policy.
Michael Widmer, the bank’s commodity strategist, noted that inflation remains uncomfortably high, increasing the likelihood that central banks will maintain a restrictive stance for longer than previously expected.
Meanwhile, analysts at Deutsche Bank said bullish momentum in the gold market was weakening as investors increasingly price in the possibility of higher borrowing costs.
In a research note published on Tuesday, the bank revised its forecast for gold to around $4,300 per ounce during the third quarter, assuming the Federal Reserve keeps rates unchanged. However, it warned that a scenario involving three to four additional rate increases could push prices as low as $3,800 per ounce.
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Despite the recent decline, gold remains significantly above historical levels after a strong rally over the past two years, supported by central bank purchases, geopolitical tensions and demand for portfolio diversification.
Analysts say the direction of precious metals in the coming months will largely depend on inflation trends, Federal Reserve policy decisions and broader global economic conditions.
Investors are now closely watching upcoming U.S. economic data for clues on whether inflationary pressures are easing or whether the Federal Reserve may need to tighten policy further, a development that could continue to weigh on gold and silver prices.
