Gold suffered one of its sharpest two-day drops of the year this week, falling nearly $400 per ounce after a hotter-than-expected inflation reading and a hawkish Federal Reserve stance converged to gut the bull case for non-yielding assets — even as war raged across the Middle East.
Spot gold tumbled to as low as $4,586 on Thursday, extending a Wednesday collapse through the $5,000 threshold following the Fed’s rate decision. The roughly 6% decline over two sessions represents the metal’s steepest back-to-back losses in months and marks an 18% retreat from its January all-time high of $5,627. Silver fared worse, cratering more than 10% to around $67.60 per ounce.
The selloff began the morning of March 18, when the Bureau of Labor Statistics reported February producer prices jumped 0.7% month-over-month — more than double the 0.3% consensus forecast — pushing the annual wholesale inflation rate to 3.4%. Core PPI rose 0.5% on the month and 3.9% year-over-year.
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Hours later, the Fed delivered the final blow. The Federal Open Market Committee held its benchmark rate steady at 3.50%–3.75% and revised its dot plot to signal just one rate cut for all of 2026, down from two. Seven of 19 officials now project no cuts this year, up from six in December, and the Fed bumped its 2026 median inflation forecast to 2.7%. The 10-year Treasury yield climbed to 4.23%, and the dollar index surged above 100 — both direct headwinds for a metal that pays no yield.
“This sharp decline in gold reflects a confluence of factors — large-scale risk asset liquidations, a hawkish shift in Fed expectations, and a stronger dollar,” said Dilin Wu, Research Strategist at Pepperstone. He characterized the move as “a pricing logic adjustment rather than a reversal of the long-term trend.”
The paradox driving the selloff is that the same Middle East conflict that would normally support gold is actively undermining it — the Iran war’s oil shock is stoking inflation and locking the Fed into a tight policy stance, lifting real yields and the dollar, two of gold’s biggest structural headwinds.
Gold enters the current rout still up roughly 9% year-to-date and having gained 66% in 2025 — its best annual performance since 1979. Long-term bank targets remain intact: JP Morgan, Goldman Sachs, and Deutsche Bank all maintain year-end targets between $6,000 and $6,300 per ounce.
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