Gold and Silver Prices Tumble as Geopolitical Risks Diminish and Rate Cut Hopes Fade: Investor Insights

Geopolitical tensions coupled with robust central bank buying had driven gold to a record high of $2,431.29 on April 12. However, gold and silver prices dropped to a two-week low on Tuesday amid subsiding fears of a Middle East conflict escalation and as investors locked in profits ahead of important U.S. data that could indicate the Federal Reserve's interest rate path. On Monday, gold futures dropped 2.73% to $2,341.1 and silver futures fell about 5.25% to $27.24 per ounce. At the time of writing, gold futures dropped 1.41% to $2,313.2 and silver futures fell about 1.54% to $26.82 per ounce.

Tehran said it had no plans to retaliate after explosions were heard in Isfahan, a city in central Iran, early on Friday, in what was suspected to have been another Israeli attack. Tehran downplayed Israel's retaliatory drone strike against Iran, in what appeared to be a move aimed at averting regional escalation.

Traders are shifting their focus to upcoming U.S. economic data, including the Federal Reserve's favored inflation gauge PCE, for insights into future monetary policy directions. A softer reading than expected could prompt Gold traders to buy the yellow metal and aim to refresh all-time highs. Otherwise, a rise in prices could underpin US Treasury yields and the Greenback, a headwind for the non-yielding metal.

Recent hawkish stances from policymakers, spurred by robust inflation figures, suggest that interest rates may stay elevated. As market expectations for monetary easing diminish, gold, which yields no interest, might struggle under the pressure of a persistent high-rate environment.

• "Gold has been the recipient of different types of buying flows in recent months, and now one of those flows has slightly dried up with safe-haven demand receding," said Tim Waterer, chief market analyst, KCM Trade.

• "Some risk of an imminent retaliation in the Middle East has been removed, which has attracted some selling activity in gold. But the question is how much scope there is to the downside," said Daniel Ghali, a commodity strategist at TD Securities.

• Chicago Federal Reserve President Austan Goolsbee on Friday said progress on bringing down inflation has "stalled" this year, becoming the latest official to drop an earlier focus on the coming need for rate cuts.