Gold prices plunge to 2008 levels as Fed rate outlook pressures market

Gold has recorded its sharpest monthly decline since October 2008, falling about 1.5 % to around $3,957 per ounce and registering a 12.7 % loss for the month. The drop is linked to a stronger U.S. dollar, rising expectations that the Federal Reserve will raise rates three more times this year, and easing geopolitical tensions in the Middle East that have reduced safe‑haven demand.

Analysts note that central banks continue to buy gold, while China has become a major net importer, taking 163 tons in May – its largest monthly import since March 2024 – and pushing its total 2026‑year‑to‑date imports up 76 % to 692 tons. The People's Bank of China added 10 tons to its reserves in May, marking the 19th consecutive month of purchases. UBS projects that, given the Fed’s likely first rate cut in 2027, a weakening dollar and ongoing central‑bank buying, gold could trade between $5,200 and $5,500 over the next year.

Technical analysis flags the $4,000 per ounce level as critical support, with $3,886 as the next lower brake. Resistance is seen near $4,100, $4,250 and $4,380. Kerem Aksoy of Rota Portföy highlights three factors supporting gold in the medium to long term: continued central‑bank purchases, lingering geopolitical risks, and the possibility of a future Fed rate cut.