Gold Just Plunged Below 4000! Gold Price Drops $36 in Asian Session, Today's Major Fed Event Set to Ignite the Market

On Wednesday (July 1) during the Asian session, the spot gold price plunged sharply. Currently, gold is trading near $3,971/oz, tumbling by $36 within the day. Today, investors will focus on the speech by Federal Reserve Chairman Warsh, which is expected to trigger significant market moves.

(Spot Gold 15-Minute Chart Source: 24K99)

As expectations for a Fed rate hike intensify, the US dollar continues to strengthen, putting pressure on gold. The ICE US Dollar Index rose by 0.2% during the day, climbing to 101.33.

A stronger dollar means higher costs for overseas investors to purchase gold, adding extra pressure on prices. Gold prices have already declined by nearly 2% over the past two trading days.

On Tuesday, the US federal funds rate futures slid further, suggesting there’s an approximately 80% chance the Federal Reserve will hike rates in September.

Currently, traders are assessing both the progress of US-Iran peace talks and digesting a series of the latest US economic data to search for clues about the Fed’s next rate policy move.

According to reports, two envoys of former US President Donald Trump have arrived in Doha as part of ongoing negotiations with Iran. However, mediators from Qatar remain cautious about a major breakthrough, stating that US officials currently have no plan to meet Iranian representatives directly.

On the eve of the talks, Iran once again emphasized its determination to control shipping through the Strait of Hormuz. This strait is a vital global energy corridor—before the outbreak of the conflict, about one-fifth of the world’s oil and liquefied natural gas shipments passed through it.

Analysts noted that the main reason for the sharp drop in gold this round is not a weakening in safe-haven demand, but that persistent tensions in the Middle East have pushed up energy prices, prompting markets to reassess US inflation and interest rate prospects.

Since the conflict began on February 28, gold has fallen by about 24% in total, breaking through several key technical levels including the 200-day moving average, indicating weakened long-term momentum.

Although oil prices have retreated after surging at the outset of the war, market bets that the Fed may raise rates this year to curb inflation are building. Higher borrowing costs typically weigh on non-yielding precious metals.

Warsh’s First Public Speech in Spotlight

Investors are closely watching the scheduled release of US ADP employment data on Wednesday and the US June non-farm payrolls on Thursday for further insight into the Fed’s monetary policy stance.

Aside from economic data, markets are also focusing on the annual European Central Bank forum taking place in Sintra, Portugal.

The most anticipated event of this forum will be the first public speech by the new Fed Chairman Kevin Warsh. Warsh had only given a media interview in the US earlier this month. This will be his first time discussing policy in a public setting.

The market will scrutinize Warsh’s remarks to determine whether recent economic data is sufficient to support the Fed’s hawkish stance.

According to the schedule, at 21:30 Beijing time on Wednesday, Fed Chairman Warsh, ECB President Christine Lagarde, Bank of England Governor Andrew Bailey, and Bank of Canada Governor Tiff Macklem will speak at the European Central Bank forum.

The latest Fed dot plot released on June 17 indicated that at least half of the Federal Open Market Committee (FOMC) officials expect a rate hike this year.

Cleveland Fed President Beth Hammack said in a sideline interview at the forum on Tuesday that she may support a rate hike if inflation fails to continue cooling.