Why Is Gold Rebounding Again? An Analysis of the U.S.-Iran Peace Agreement, Federal Reserve Policies, and Real Interest Rate Logic

In mid-June 2026, the international gold market experienced a deep correction and has now shown a clear rebound and recovery. As of June 16 during the Asian trading session, spot gold was quoted at $4,313.33 per ounce, up $45.59 from the previous trading day, a daily increase of 1.07%. Just a week earlier, on June 11, gold prices briefly dipped to around $4,020 per ounce, wiping out all gains since 2026 and turning them negative. In just a few trading days, gold rebounded by about $300, and the magnitude and speed of this price movement have sparked focused discussions on the medium-term trend of gold.

This round of sharp volatility in gold prices is not driven by a single factor but results from the cross-resonance of three core logical lines: geopolitical landscape, global interest rate expectations, and asset allocation preferences. In mid-June, a framework consensus was officially reached on a peace agreement between the U.S. and Iran, with news of the imminent reopening of the Strait of Hormuz significantly lowering crude oil prices; meanwhile, the Federal Reserve will hold its first monetary policy meeting under new Chair Kevin Wirth on June 18, with market expectations for the full-year interest rate path shifting from rate cuts at the beginning of the year to maintaining rates or even raising them. Under the overlay of these two forces, gold faces a tug-of-war between “geopolitical risk premium compression” and “relief in rate hike expectations.” From three dimensions—geopolitical variables, the transmission mechanism of real interest rates, and the comparison of capital flows between gold and risk assets—a structured dissection of the current fundamental landscape of the gold market is conducted, followed by an assessment of the medium-term trajectory of gold prices.

U.S.-Iran Peace Agreement: Bidirectional Transmission of Geopolitical Premium

On June 14, 2026, U.S. President Donald Trump announced on social media that the peace agreement with Iran “has now been completed,” officially approving the reopening of the Strait of Hormuz and ordering the U.S. Navy to lift the maritime blockade of Iranian ports. On June 15, Pakistani Prime Minister Shabaz confirmed that the U.S. and Iran had reached a peace agreement, with both sides announcing an immediate and permanent cessation of all military actions on all fronts. The formal signing ceremony is scheduled for June 19 in Switzerland. This event marks the transition of the ongoing months-long Middle East geopolitical conflict into a substantive easing phase.

As a critical channel for global energy transportation, the Strait of Hormuz handles about 20% of the world’s seaborne oil daily. The supply premium created by the blockade during the conflict was fully priced into oil prices. After the peace agreement, the expected release of supply constraints directly triggered a sharp drop in oil prices—on June 15, WTI crude briefly fell below $80 per barrel, closing down 4.05% at $81.38 per barrel. The decline in oil prices has two opposite transmission effects.

First, the drop in oil prices directly alleviates inflationary pressures. Energy prices are a significant component of inflation data, and the sharp fall in crude oil prices will drag down CPI readings, weakening the urgency for the Fed to tighten monetary policy further. The CME FedWatch tool shows that after the U.S.-Iran agreement news, traders lowered the probability of the Fed raising rates by December 2026 from nearly 70% the previous week to 57%. The cooling of inflation expectations and the reduction in rate hike probabilities are positive for gold from the perspective of lowering holding costs—this is the core reason why gold and oil prices moved in opposite directions after the agreement was announced.

Second, the easing of geopolitical conflict means that the “risk premium for safe-haven demand” that previously supported gold buying is being squeezed out. From late May to early June, international gold prices fell from a historic high of $5,598 per ounce to around $4,020, with some of the decline corresponding to the compression of geopolitical risk premiums. The current level around $4,300 has partially digested the geopolitical risk release brought by the peace agreement.

The simultaneous existence of these two forces means that gold’s recent movement is not unidirectional. In the short term, the support from the decline in oil prices and the cooling of rate hike expectations, and the suppression from the compression of geopolitical risk premiums, offset each other. This explains why gold prices, after rebounding to around $4,300, did not further surge but instead entered a range-bound oscillation.

Federal Reserve Policy Shift: Repricing of Real Interest Rates Reasserts Dominance

If geopolitical events are the short-term drivers of recent gold price movements, then the direction of the Federal Reserve’s monetary policy is the key pricing anchor for the medium term.

In the early hours of June 18 Beijing time, the Fed will release its June Federal Open Market Committee (FOMC) decision. This is the first FOMC meeting chaired by Kevin Wirth since his official appointment on May 22. The market widely expects a greater than 98% probability that the Fed will keep the federal funds rate in the range of 3.50%–3.75%. However, the actual rate decision itself is less suspenseful; the real market focus is on the new dot plot and the policy statements in Wirth’s press conference.

The dot plot for March 2026 still shows FOMC members maintaining the guidance of one rate cut in 2026 and 2027. However, over the past two months, U.S. labor market data has continued to exceed expectations—non-farm payrolls added 172,000 jobs in May, well above the expected 85,000, with the unemployment rate holding at a relatively low 4.3%, and CPI in May surpassing 4% year-over-year. Given this data combination, the macro basis for maintaining the rate cut guidance has evaporated. As of June 15, CME FedWatch shows the market’s probability of a rate cut in 2026 has fallen to zero, with the probability of at least a 25 basis point hike in December reaching about 70%. Huatai Securities’ research report issued on June 15 predicts that the June dot plot will officially remove the 2026 rate cut guidance, shifting to a stance of holding rates steady, with the Fed remaining open to future rate hikes.

Gold, as a non-yield asset, is most sensitive to real interest rates and the US dollar index. An increase in real interest rates (nominal rates minus inflation expectations) will directly raise the opportunity cost of holding gold, exerting downward pressure on gold prices. Over the past two months, gold has fallen from a high of $5,598 to $4,020, partly due to market expectations shifting from rate cuts to rate hikes by the Fed, which has driven up U.S. Treasury yields and real interest rates.

However, it is important to note that the trajectory of real interest rates depends on the relative changes in nominal rates and inflation expectations. The sharp decline in oil prices is suppressing inflation expectations. Even if the Fed maintains the benchmark rate unchanged, if inflation expectations decline more than nominal rates, real interest rates could rise; conversely, if rate expectations are revised downward due to weakening economic data, gold could benefit from an upward move. This is the core variable that most gold analysts are currently watching—geopolitical easing has lowered energy prices and reduced the urgency for Fed rate hikes, but the effects on real interest rates are in opposite directions.

Gold and Risk Assets: Structural Divergence in Capital Flows

Following the announcement of the U.S.-Iran peace agreement, global capital markets have shown a clear asset class divergence. On June 15, the Dow Jones Industrial Average rose 0.96%, closing at 51,684.88 points, a new all-time high; the Nasdaq surged 3.07%, and the S&P 500 gained 1.67%. The market capitalization of SPACEX exceeded $2.5 trillion, and Nvidia’s stock rose over 3%. Meanwhile, spot gold rose 2.19% to $4,309.05, and Bitcoin broke through $65,000.

Crude oil prices plummeted, yet risk assets and safe-haven assets rose in tandem—this seemingly contradictory pattern actually reflects a shift in gold’s pricing logic toward interest rate expectations. When oil prices fall, reducing inflationary pressures and the urgency of rate hikes, market expectations for the interest rate path shift from “rate hikes” back toward “holding rates steady” or even “mild rate cuts,” benefiting both valuation-sensitive tech stocks and interest rate-sensitive gold.

However, looking at longer-term capital flow data, there are no signs of large-scale inflows into gold ETFs. Over about 60 days from mid-April to mid-June, a total net outflow of 17.661 billion yuan was recorded across seven major domestic gold ETFs, with only Huaxia Gold ETF experiencing a net inflow of 455 million yuan; the other six products saw net outflows. Similarly, the international market shows a comparable pattern: in the week ending June 16, global physical-backed gold ETFs experienced about $2.3 billion in weekly outflows, totaling approximately $7.5 billion over the past four weeks. The global gold ETF holdings have fallen back to lows not seen since December 2025.

On the other hand, since late May, many international investment banks have collectively lowered their short-term gold target prices. Citibank cut its three-month target to $4,300 per ounce; JPMorgan lowered its annual average gold price forecast from $5,708 to $5,243. The common rationale for these downward revisions is weak short-term investment demand, evidenced by persistently low COMEX futures open interest and trading volume, tepid ETF inflows, and profit-taking pressures.

Nevertheless, the cautious short-term stance of these institutions does not conflict with their medium- and long-term bullish outlooks. UBS maintains a year-end target of $5,600 per ounce, stating that the upward potential for gold beyond the baseline forecast is strengthening in the medium to long term, with supporting factors remaining intact. Goldman Sachs sets a year-end target of $5,400, citing sustained strong central bank gold purchases, averaging about 70 tons per month, as a key reason for their bullish view. The “short-term cold, medium-term hot” characteristic of their outlook aligns with the microstructure of the current gold market—geopolitical risk easing reduces short-term speculative demand, but structural central bank buying and the global de-dollarization trend have not reversed.

It is noteworthy that in the first half of 2026, a crowded trade once formed in the market—investors simultaneously allocated to high-elasticity tech stocks and defensive gold to hedge against risks of a single style. After geopolitical easing, some funds withdrew from gold and shifted into tech stocks, evidenced by continuous inflows into AI-related assets and persistent outflows from gold ETFs. The sustainability of this switch depends on two factors: whether Fed policy signals will reignite concerns about liquidity, and whether tech stock valuations can withstand repeated tests of rate expectations.

The Multi-Cycle Overlay Framework for Gold Pricing

Combining the analysis from the three dimensions above, the current gold market is in a state of multi-cycle overlay.

From the geopolitical cycle perspective, the framework implementation of the U.S.-Iran peace agreement is pushing the Middle East situation from high conflict intensity toward easing. The prospects for the Strait of Hormuz’s navigation are moving from potential to certain, and the rapid removal of oil supply premiums has largely been completed. The next variables to watch are the pace of implementation—full supply recovery may take months, and the extent of rebound after the recent sharp oil price decline will determine the inflation expectation volatility range.

From the monetary policy cycle perspective, market expectations for the Fed’s rate path have shifted from an easing cycle at the start of the year to maintaining rates or even raising them. Wirth’s first policy statement on June 18 will be a key point for the market to reassess this expectation. If the median of the dot plot only shows rates remaining steady without a clear rate hike path, then the “most hawkish” expectations already priced in may need downward adjustment, potentially providing temporary support for gold.

From the asset allocation cycle perspective, the structural demand for central bank gold purchases forms the most stable bottom support for gold prices. During the sharp price adjustments from March to May, China’s central bank accelerated gold purchases, and emerging market central banks’ demand for gold allocation continues to deepen. This “sovereign-level buying” contrasts sharply with short-term speculative inflows and outflows, representing a fundamental difference in the capital flow logic between gold and other risk assets.

Conclusion

On June 16, 2026, spot gold stands at $4,313 per ounce—still some distance from the year's high of $5,598, but about $300 higher than the low of $4,020 a week earlier. This price is neither the most optimistic nor the most pessimistic moment for gold. The U.S.-Iran peace agreement has suppressed geopolitical risk premiums, but falling oil prices have also lowered rate hike expectations; the Fed’s policy shift expectations are widely priced in, yet Wirth’s first statement still carries some uncertainty; ETF capital outflows persist, but central bank gold purchases at the structural level remain intact.

Looking ahead to the medium term, the core pricing anchor for gold remains the direction of real interest rates. The trajectory of real interest rates depends not on a single rate decision but on the relative pace of change between inflation expectations and nominal rates. The future movements of oil prices, the actual pace of Middle East agreement implementation, and the guidance on the 2027 path in the Fed’s dot plot will be the key variables to observe in the coming weeks for gold price fluctuations. For market participants, the most critical task at this stage is not to judge a single direction for gold but to find a logically consistent assessment framework within the nested dynamics of geopolitics, interest rates, and capital flows.