The weakness in precious metals mirrored losses in global technology stocks, which also came under pressure as investors adjusted to the prospect of higher borrowing costs.

Higher interest rates typically reduce the appeal of gold because the metal does not generate income, making interest-bearing assets comparatively more attractive.

Safe-Haven Status Questioned

Since the outbreak of the U.S.-Iran conflict on February 28, gold's traditional role as a safe-haven asset has come under increasing scrutiny.

Historically, geopolitical uncertainty and market volatility have supported demand for gold. However, investors are now focusing more on monetary policy and interest-rate expectations than geopolitical risks.

The recent U.S.-Iran peace agreement has also reduced concerns about prolonged regional instability, removing one of the key factors that had supported gold prices earlier this year.

Hawkish Federal Reserve Changes Outlook

Last week's Federal Reserve meeting marked a significant shift in market expectations.

Although policymakers left interest rates unchanged, updated projections showed growing support for future rate hikes amid persistent inflation concerns.

Markets now believe there is a meaningful possibility of further tightening before the end of the year.

The prospect of higher rates has strengthened the U.S. dollar and increased Treasury yields—both traditionally negative factors for gold.

Wall Street Cuts Gold Forecasts

Several major investment banks have revised their outlooks for gold following the Fed meeting.

Bank of America

Bank of America now believes its previous forecast of $6,000 per ounce is unlikely to be achieved under current conditions.

According to commodity strategist Michael Widmer, the inflation environment remains "uncomfortable," increasing the likelihood that central banks will maintain tighter monetary policies.

Deutsche Bank

Deutsche Bank also downgraded its outlook, warning that the balance of risks has shifted.

In a note published Tuesday, the bank stated:

"Hawks are driving out bulls."

The bank now forecasts gold could average around $4,300 per ounce during the third quarter if the Federal Reserve keeps rates unchanged.

However, Deutsche Bank warned that a scenario involving three to four additional rate hikes could push gold prices down toward $3,800 per ounce.

Dollar Strength Adds Pressure

Gold prices were little changed on Thursday, but gains remained limited as the U.S. dollar continued to strengthen.

A stronger dollar makes gold more expensive for holders of other currencies, often reducing international demand.

At the same time, falling oil prices and easing geopolitical tensions have diminished expectations for near-term interest-rate cuts, further weighing on precious metals.