NEW YORK, June 11 — Gold prices continued their sharp decline on Thursday, June 11, falling to their lowest levels in roughly six to seven months despite rising inflation and escalating conflict in the Middle East.

Spot gold traded near $4,100 per ounce, down more than 10% over the past month, even as investors confront war concerns, higher energy costs, and renewed inflation pressures.

Ordinarily, those conditions would support demand for gold as a traditional safe-haven asset.

Instead, investors are increasingly focused on the prospect of higher interest rates.

Higher Rates Weigh on Gold

The conflict with Iran and disruptions around the Strait of Hormuz have pushed oil and gasoline prices sharply higher, fueling inflation concerns.

At the same time, investors increasingly believe the Federal Reserve may keep rates elevated for longer—or potentially raise them further—to contain rising prices.

That expectation has strengthened the U.S. dollar and boosted Treasury yields.

The U.S. Dollar Index climbed to its strongest level since April, while the yield on the benchmark 10-year Treasury note moved above 4.50%.

Because gold pays no interest, it often struggles when bonds and cash offer higher returns.

As interest-bearing investments become more attractive, some investors shift money away from precious metals.

Silver has faced similar pressure, falling sharply alongside gold.

Central Banks Continue Buying

The decline comes despite continued demand from global central banks.

Central banks purchased approximately 244 metric tons of gold during the first quarter of 2026, continuing a multi-year trend of diversification away from the U.S. dollar.

Demand for physical gold bars also increased earlier in the year, although jewelry demand weakened in major markets including India and China.

Those purchases have helped support prices but have not been enough to reverse the broader selloff.

Long-Term Bullish Factors Remain

Supporters of gold point to several longer-term trends.

U.S. federal debt now exceeds $37 trillion, while annual interest payments have surpassed $1 trillion.

Meanwhile, central banks have remained net buyers of gold for four consecutive years.

Historically, those conditions have supported long-term demand for precious metals.

The challenge for gold today is the behavior of so-called real yields—the return investors receive after accounting for inflation.

When interest rates rise faster than inflation expectations, gold becomes less attractive relative to bonds and cash.

Global Central Banks Tighten

Adding to pressure on precious metals, the European Central Bank raised its benchmark interest rate by 0.25 percentage points on Thursday, bringing the rate to 2.25%.

The ECB also increased its inflation forecasts, citing higher energy costs and economic uncertainty linked to the Middle East conflict.

Higher interest rates globally create additional headwinds for gold markets.

Federal Reserve Now Holds the Key

Attention now turns to the Federal Reserve’s upcoming June meeting.

Investors are closely watching for guidance from Chair Kevin Warsh and updated projections showing where policymakers believe rates are headed.

Markets largely expect rates to remain unchanged this month.

The larger question is whether officials signal further tightening later this year.

A more aggressive outlook could pressure gold further, while indications that rates may stabilize could support a rebound.

For many investors, the recent decline serves as a reminder that gold is not always a straightforward inflation hedge.

In the short term, interest-rate expectations often matter more than inflation itself.

JBizNews Desk — New York

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