Gold Plunges 2% as December Fed Hike Odds Hit 90%: Dollar Near 13-Month High Squeezes Bullion From Both Sides

Key Takeaways

• Gold falls sharply: Spot gold dropped 1.8% to $4,117.61 per ounce, while gold futures slipped 1.6% to $4,135.10 — reversing Monday’s 0.7% gain.
• Dollar near 13-month high: The DXY held near its strongest level since May 2025, making gold pricier for overseas buyers.
• December hike at 90%: Futures markets now price roughly a 90% probability of a Fed rate hike in December — with some investors anticipating more than one increase.
• Warsh’s hawkish debut: The first Fed meeting under new Chair Kevin Warsh delivered a decisive hawkish shift, with growing support for at least one 2026 rate increase.
• Rates held at 3.50%-3.75%: But updated projections showed nine of 19 officials backing tighter policy before year-end.
• Dual pressure on gold: A stronger dollar and higher rate expectations are simultaneously compressing bullion’s appeal.
• Iran sanctions waiver issued: The U.S. granted a 60-day waiver on some Iranian oil sales following constructive Switzerland talks.
• Gold’s safe-haven paradox persists: The Iran war’s inflationary consequences continue to overshadow gold’s traditional geopolitical safe-haven appeal.
• PCE data Thursday: The Fed’s preferred inflation gauge will be a key test for rate hike expectations.
• Silver crashes 4.3%: To $62.29 per ounce — a dramatic underperformance.
• Platinum falls 2.6%: To $1,639.60 per ounce.
• Copper slumps: LME copper dipped 1.2% to $13,486.33 per ton; U.S. copper futures declined 2.3%.

Gold prices fell nearly 2% on Tuesday as a firmer U.S. dollar and rising expectations of Federal Reserve interest-rate hikes this year dented demand for the non-yielding metal, while investors also weighed progress in U.S.-Iran peace negotiations.

Spot gold fell 1.8% to $4,117.61 an ounce by 02:56 ET (06:56 GMT). U.S. gold futures slipped 1.6% to $4,135.10.

The yellow metal had risen 0.7% in the previous session on optimism about U.S.-Iran peace talks.

Dollar and Rate Hike Fears the Twin Headwinds

The U.S. Dollar Index held near a 13-month high touched last week, drawing support from a hawkish shift at last week’s Federal Reserve meeting — the first chaired by Kevin Warsh.

While policymakers left interest rates unchanged at 3.50%-3.75%, updated projections showed growing support for at least one rate increase before year-end.

Futures markets are now pricing about a 90% probability of a rate hike in December, with some investors even anticipating more than one increase as policymakers remain focused on inflation risks.

A stronger dollar makes gold more expensive for holders of other currencies, while higher interest rates reduce the appeal of bullion because it pays no interest.

Iran Sanctions Waiver and Peace Progress

Investor attention also remained on diplomatic efforts between Washington and Tehran. The United States granted a 60-day sanctions waiver on some Iranian oil sales following initial talks in Switzerland, while U.S. officials described the discussions as constructive.

While gold is traditionally viewed as a safe-haven asset during periods of geopolitical turmoil, investors have increasingly focused on the inflationary consequences of the Iran conflict. The war drove oil prices sharply higher earlier this year, raising concerns that energy-driven inflation could force central banks to maintain restrictive monetary policy for longer.

Investors also await U.S. Personal Consumption Expenditures (PCE) inflation data due on Thursday — the Fed’s preferred price gauge.

Among other precious metals, silver prices slipped 4.3% to $62.29 per ounce, while platinum fell 2.6% to $1,639.60 per ounce.

Benchmark copper futures on the London Metal Exchange dipped 1.2% to $13,486.33 a ton, while U.S. copper futures declined 2.3% to $6.22 a pound.