The price of gold fell below the $4,000 per ounce mark for the first time since last November, in a sharp decline that ended a significant portion of the momentum supporting the yellow metal's historic rally over the past three years, amid growing questions about whether gold's upward cycle has reached its end.

Gold prices dropped by about 3.7% during trading, touching the level of $3,965 per ounce before paring some of its losses later. Silver also fell below $60 per ounce for the first time since last December, losing more than 50% of its value compared to its peak recorded in January.

Why did gold decline?

The pressure on gold resulted from a combination of economic and geopolitical factors, foremost among them the repercussions of the US-Iran war, which led to higher energy prices and increased inflationary concerns, boosting expectations that central banks will keep interest rates higher for longer.

Rising interest rates typically reduce gold's appeal, as it is a non-yielding asset compared to other investment instruments such as government bonds.

Despite oil prices retreating recently amid ongoing negotiations between the United States and Iran to reach a permanent agreement, gold faced additional pressure following statements by the new Federal Reserve Chairman, Kevin Warsh, who hinted at adopting a more hawkish monetary policy to combat inflation, prompting investors to reprice their expectations regarding interest rates.

Ewa Manthey, a commodities strategist at ING Groep NV, said: "The main driver behind the recent decline in gold prices is a broad reassessment of interest rate expectations."

Has gold's rally ended?

Major financial institutions have already begun lowering their future gold forecasts, reflecting a decline in the optimism that prevailed in markets over the past months.

Goldman Sachs cut its gold price target by $500 per ounce, but it still expects the precious metal to reach $4,900 by the end of the year. Deutsche Bank also lowered its gold price estimates for the fourth quarter by 17%.

Deutsche Bank analysts noted that continued outflows from gold-backed exchange-traded funds reflect a decline in investment demand, while the lower price of gold in the Chinese market compared to US COMEX exchange prices indicates weak import demand, reducing one of the market's main support sources.

Despite these pressures, central banks remain a key strength for the gold market, having increased their purchases of the precious metal at the fastest pace in over a year during the first quarter, with recent surveys indicating a continued trend toward boosting their reserves in the coming period.
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