For nearly four months, one factor dominated everything in the gold market: the Iran war and the closure of the Strait of Hormuz. Every gold move could be traced back to oil, inflation, and the conflict. But over the past week, something fundamental shifted, and understanding it is essential for any gold buyer. The dominant driver of gold prices is no longer the Middle East — it is the Federal Reserve. This Monday June 22, with gold bouncing to $4,186 after a third straight weekly decline, that shift explains everything.
Consider what happened. On Friday, the US-Iran peace deal signing in Switzerland was cancelled. The talks stalled. The interim agreement that drove a massive relief rally just over a week ago hit an early snag, and a lasting resolution now appears further away. In the old market — the market of February through May — this kind of geopolitical setback would have sent gold sharply higher, because renewed conflict risk drives safe-haven demand. Instead, gold barely reacted to the stalled talks and remained near its lows. The Iran story, which moved gold for months, has lost its grip on the price.
What took its place is the Federal Reserve. Last Wednesday, new Fed Chair Kevin Warsh delivered a hawkish shock: nine of the Fed’s eighteen policymakers now project at least one rate hike in 2026, and the Fed removed its easing bias entirely. The result has been powerful. The US dollar climbed to a 13-month high. Markets now price roughly 66% to 70% odds of a rate hike by September. As one market summary put it, Fed hawkishness has displaced Hormuz noise as the dominant market risk. Gold, which competes with interest-bearing assets and is priced in dollars, faces a direct headwind from both the stronger dollar and the higher rate expectations.
Why does this distinction matter so much for buyers? Because it tells you what to watch. For months, the right thing to monitor was oil prices and the war. Now, the right thing to watch is US economic data and the Fed. This week brings two critical readings: US Q1 GDP and the PCE inflation index, the Fed’s preferred inflation gauge. If these show the economy cooling and inflation easing — which should happen as the wartime oil spike fades — the Fed’s hawkish stance becomes harder to justify, and gold can recover. If they come in strong, the dollar stays firm and gold stays pressured.
There is also an important development from the institutional side. Goldman Sachs lowered its year-end gold target to $4,900 from $5,400, reflecting the pushed-back rate-cut expectations. While this is a reduction, note that $4,900 still represents a 17% gain from today’s price of $4,186 — the bank remains bullish, just less aggressively so.
For Gulf jewellery buyers, the practical takeaway is this: gold near $4,186 is 25% below its January record of $5,589, and the structural floor remains firm. Central banks turned net buyers again in April, adding 19 tonnes, and 45% plan to increase reserves over the next year. The driver has changed from Iran to the Fed, but the long-term case for gold remains intact.
