The Federal Reserve’s decision to maintain the federal funds target range between 3.50% and 3.75% has failed to soothe investors, who are now recalibrating expectations toward higher rates. Market sentiment has shifted from anticipating cuts to weighing the probability of a hike as early as July, currently estimated at 38.5%. This repricing elevates the opportunity cost of holding non-yielding assets, leaving gold vulnerable to a broader de-risking trend.

Laurence Booth, global head of markets at CMC Markets, noted that the recent decline appears to be an orderly withdrawal rather than panic-driven liquidation. However, the lack of robust physical demand—evidenced by softening premiums in China—has removed a critical floor for prices. Geopolitical anxieties surrounding the Strait of Hormuz, while still present, are providing less support as commercial shipping resumes, subsequently cooling oil prices and reducing inflation-hedge buying. Investors are now looking toward next week’s manufacturing and services PMIs, alongside May PCE inflation figures, for further direction on the macroeconomic outlook.