Gold fell more than 3% today to $3,994.86 an ounce following an unexpectedly aggressive speech from Fed Chairman Christopher Waller. Waller made it clear that a scenario of monetary tightening is just as likely as further easing, which completely changes the market picture in recent weeks. Key takeaway: The Fed may have to raise interest rates if core CPI numbers turn hot this week.
The market immediately responded by repricing expectations – short-term interest rate futures increased the likelihood of a rate hike in July from 35% to 45%, while traders now estimate the likelihood of any rate hike this month at 50%. This is a sharp departure from the consensus just days ago, when the market was instead pricing in a rate cut. Source: CME Fed Watch Tool.
Waller stressed that the labor market is stable and close to the maximum employment target, so it is not a source of inflationary pressure. Instead, he identified three factors driving inflation: tariffs, energy prices linked to the situation in the Middle East, and robust consumption growth supported by investments in artificial intelligence. Core PCE rose from 3.0% in December to 3.4% in May, while the core measure now stands at 4.1%, a significant deviation from the Fed’s target.
This is a direct blow to gold: Higher real interest rates and a stronger dollar (a typical reaction to aggressive Fed policy) reduce the metal’s appeal as a non-yielding asset that is negatively correlated with the US dollar. Tomorrow’s CPI data will be a key catalyst: high readings could confirm a rate hike scenario and put further pressure on gold, while cooler data could reverse some of today’s sell-off.
GOLD is currently trading within a key support zone defined by recent lows, which were the lowest levels recorded since 2025. Source: xStation
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