Why has gold prices fallen to a two-month low? The dual pressure of the US-Iran deadlock and hawkish risks from the Federal Reserve

Geopolitical Games and Monetary Policy Expectations Are Creating a Rare Double Pressure.
As of May 28, 2026, gold prices have fallen to their lowest in two months.
According to Gate Market Data, the current XAU quote is $4,380 USD, down 1.7% over 24 hours.

Market previously bet that a US-Iran ceasefire would quickly translate into lasting peace, while expecting the Federal Reserve to steadily enter a rate-cutting cycle.
However, both of these core narratives have experienced substantial reversals over the past two weeks.

Why Geopolitical Premium Has Failed to Support Current Gold Prices

Geopolitical risk is usually the most direct upward driver for gold.
But recently, the development path of US-Iran tensions has shown a rare "noise and substantive divergence" feature:
The intensity of conflict has not significantly escalated, but the peace dividend has also failed to materialize.

In recent days, limited military strikes occurred on both sides, but official US statements continue to affirm that the ceasefire agreement remains valid.
Meanwhile, rumors of the Strait of Hormuz reopening soon and an imminent agreement have flooded the market, yet lack any official confirmation documents.

This uncertainty has not translated into sustained buying of gold.
The reason is that the current pricing logic for gold regarding geopolitical events has shifted from "risk exists" to "whether risk marginally worsens."
As long as the situation does not breach the upper limit of conflict intensity, the market is more focused on supply recovery expectations after the Strait reopens.
In other words, gold prices have not been supported by the Iran-US deadlock because the deadlock itself has been incorporated into the "baseline scenario" by the market, rather than being an unexpected shock.

How the Shift in Federal Reserve Policy Path Suppresses Gold’s Monetary Attribute

Gold’s monetary attribute is highly sensitive to real US interest rates.
The ongoing policy narrative shift is exerting a more sustained pressure on gold prices.

An increasing number of Fed policymakers have recently publicly stated that the easing bias should be abandoned.
This signals a significant rise in the probability of a hawkish adjustment at the June Federal Open Market Committee (FOMC) meeting.
The core logical chain is as follows:

• US inflation data shows stronger-than-expected resilience;
• Labor market and consumption data have not shown enough weakness to trigger rate cuts;
• If the US-Iran situation does not worsen significantly, the Fed will have room to focus on "inflation as the main concern" in its policy operations.

This means that the market’s previous expectations of multiple rate cuts this year need to be substantially revised.
Once the Fed formally abandons its easing bias, real interest rate expectations will be reassessed upward, significantly increasing the holding costs of non-yielding assets like gold.
This is a deep monetary factor currently weighing on gold prices.

How the US-Iran Deadlock and Hawkish Risks of the Fed Interact to Create a Cumulative Effect

A single variable is enough to influence gold prices, but currently, two variables are aligning in the same direction, with a reinforcing logical chain between them.

First Layer of Cumulative Effect: Dislocation in Risk Hedging Demand.
If the US-Iran deadlock prolongs, it should theoretically boost safe-haven demand.
But the problem is, if the deadlock persists and oil prices remain high due to the Strait of Hormuz not closing, it will further raise inflation expectations, thereby strengthening the hawkish stance of the Fed.
This offsets the safe-haven function of gold with the negative impact of monetary policy.

Second Layer of Cumulative Effect: Diverging Expectation Paths.
The market is currently pricing in two possible scenarios:

• Scenario A: Situation resolves, the Strait opens → oil prices fall → rate cut expectations rise → theoretically supporting gold;
• Scenario B: Strait remains closed longer → oil prices stay high → Fed rate hike risk increases → gold faces downward pressure.

The market is shifting the probability from Scenario A toward Scenario B.
This expectation migration itself exerts ongoing downward pressure on gold prices.

How the Strait of Hormuz Variable Becomes a Key Node in Gold Pricing

The navigability of the Strait of Hormuz is the core transmission mechanism linking US-Iran geopolitical tensions with global inflation expectations.
Currently, market pricing of this variable shows clear asymmetry.

If the Strait reopens:
Oil prices will face downward pressure, marginally easing global inflation.
This could give the Fed more policy flexibility, with rate cut expectations potentially rising again.
In this scenario, gold would benefit from "easing rate pressure" and "weakening dollar expectations."

If the Strait remains closed or the situation escalates:
Oil prices will stay high or even rise further.
This will directly push up energy-driven inflation and reinforce the narrative of "the Fed being forced to hike."
In this scenario, gold faces a double hit: rising real interest rates + increased holding costs.

Currently, gold has fallen to $4,380 USD, reflecting the market’s accumulation of risk premiums for the "continued closure of the Strait + hawkish Fed shift" combination, rather than fully pricing in this scenario.

What Are the Core Macro Drivers for Mid-term Gold Price Trends?

From a medium-term perspective, the main contradictions in the gold market will be jointly determined by the following three variables, rather than a single event.

Variable 1: Actual Progress of US-Iran Negotiations.
Focus on official confirmation of ceasefire implementation, Strait of Hormuz navigation announcements, and third-party diplomatic interventions.
Any substantive breakthrough will trigger a structural rebound logic for gold prices.

Variable 2: Language Adjustments in the June FOMC Statement.
If the statement removes references to "easing bias" or the dot plot shows the number of rate cuts in 2026 being reduced to 1 or 0, it will exert medium-term downward pressure on gold.
Conversely, if the situation with Iran and Iraq unexpectedly escalates, maintaining flexibility, the pressure on gold will temporarily ease.

Variable 3: Actual Path of Inflation Data.
If CPI and PCE data in the next 1-2 months show a clear downward trend, even with geopolitical deadlock, the Fed’s policy space will expand.
This will weaken the most core macro constraint currently suppressing gold prices.

These three variables are interconnected; the most important aspect is not their individual directions but when they resonate together.

How Investors Should Understand the Current Risk Pricing Logic in the Gold Market

The current gold market exhibits a key feature:
Gold prices are more sensitive to bad news than good news.
This is often a sign that the market is in a "pressure pricing" stage.

From a risk management perspective, it is important to distinguish between two types of risks:

Geopolitical Risks are highly nonlinear.
The US-Iran situation could shift from one extreme to another within hours.
Therefore, even if gold prices are under pressure now, a sudden event could trigger a rapid reversal.
This risk cannot be eliminated through linear extrapolation.

Monetary Policy Risks are more predictable.
The Fed’s policy path depends on observable economic data, with a relatively slow change pace.
This risk can be assessed in an orderly manner by tracking employment, inflation, and consumption data.

Compared to the two, the main downward pressure on gold currently comes from monetary policy, while potential upward elasticity stems from geopolitical risks.
This asymmetric structure suggests that, in the medium to short term, gold is more likely to exhibit a "slow decline and quick rise" pattern.

Summary

The US-Iran deadlock has not escalated into conflict but has entered a "no progress, no breakthrough" noise period;
Meanwhile, the probability of a hawkish shift by the Fed is increasing substantially.
These two independent variables are currently forming a aligned force, pushing gold prices to a two-month low of $4,380 USD.

The navigability of the Strait of Hormuz is the key node connecting the two:
Closure of the Strait will reinforce inflation and rate hike logic, while reopening could support gold through falling oil prices and rate cut expectations.
In the medium term, the real progress of US-Iran negotiations, language adjustments at the June FOMC, and inflation data paths will be the three core variables determining gold’s direction.

The current market pricing reflects investor risk premiums for the "deadlock persists + hawkish shift" combination.
Geopolitical risks are highly nonlinear, while monetary policy risks are more predictable—this structure makes gold more likely to follow a "slow decline, quick rise" path.

Frequently Asked Questions (FAQ)

Q: What is the main reason for gold falling to a two-month low?
A: Mainly two reasons. First, there is no substantive progress between US and Iran; official confirmation of ceasefire or Strait reopening is lacking, so the market cannot get clear geopolitical positives.
Second, hawkish voices within the Fed are increasing, with more policymakers advocating to abandon easing bias, raising expectations of a hawkish shift at the June FOMC.

Q: How does the Strait of Hormuz status affect gold prices?
A: The Strait’s navigability influences inflation expectations and Fed policy through oil prices.
If reopened, falling oil prices will ease inflation pressures and support rate cuts, boosting gold.
If closed long-term or escalated, high oil prices will sustain inflation and increase the risk of Fed rate hikes, suppressing gold.

Q: What adjustments might the Fed make at the June meeting?
A: Watch whether the statement removes references to "easing bias" and whether the dot plot reduces the number of rate cuts in 2026 to 1 or 0.
If both move hawkishly, it will exert medium-term downward pressure on gold.

Q: Why has geopolitical risk not pushed up gold prices?
A: Because the current pricing logic for gold has shifted from "risk exists" to "whether risk marginally worsens."
As long as the Iran-US situation does not breach the upper limit of conflict intensity, the market is more focused on potential supply recovery after the Strait reopens.

Q: Has the current gold price fully priced in all risks?
A: No. The current price reflects the market’s accumulation of risk premiums for the "deadlock persists + hawkish shift" scenario, not a full valuation of this scenario.
The nonlinear nature of geopolitical risks means that sudden events can quickly alter the pricing logic.