Gold Drops Below US$4,000/oz for the First Time Since November

Gold tumbled more than 3.5% to $3,970 per ounce on Wednesday, its lowest level since November 2025, as a hawkish Federal Reserve, a surging US dollar, and the collapse of gold's war-risk premium combined to end bullion's three-year rally in a single brutal session. In India, 24-karat gold is trading at ₹1,44,330 per 10 grams as global prices transmit directly to domestic markets.

The Federal Reserve remains the dominant bearish force. At his first FOMC press conference, Fed Chair Kevin Warsh downplayed forward guidance and reaffirmed his commitment to price stability. Fed Governor Christopher Waller explicitly opposed discussions of rate cuts. Markets are pricing a 76% probability of a Fed rate hike in September. Deutsche Bank expects two hikes totalling 50 basis points, while Bank of America Securities anticipates three hikes this year. The US Dollar Index rose to approximately 101.35, its highest level since May 2025.

The Indian rupee is hovering around 94.6 per dollar, stabilising on the back of falling crude oil prices, though its near-term outlook remains constrained by the prospect of higher US interest rates. A stronger dollar partially offsets the benefit of falling global gold prices for Indian consumers, as import costs rise in rupee terms.

Silver fell over 5% to approximately $58.70 per ounce, a six-month low and more than 50% below its January peak of $121.65. The gold-silver ratio widened to 65.6, reflecting silver's disproportionate exposure to rate-hike fears given its sensitivity to industrial growth expectations.

Goldman Sachs lowered its year-end gold target from $5,400 to $4,900. Deutsche Bank slashed its third-quarter forecast by over a fifth to $4,300, while Citigroup cut its three-month target to $4,000. In an extreme scenario of three to four Fed hikes, gold could fall to $3,800, implying Indian retail prices could retreat towards ₹88,000 to ₹90,000 per 10 grams if the rupee holds steady. Markets now await Thursday's May PCE inflation print, with consensus at 4.1% year on year, a hot reading that could deepen losses further.