Gold's CPI-Day Rout Knocks IAU Down 8% in a Week — Can Bullion Hold Its Ground Against a Fed That Refuses to Blink?
Shares of the iShares Gold Trust slid 3.2% to $77.48 on June 10, as a fresh inflation print cemented the case that interest rates aren't coming down anytime soon — and may even go up. The May CPI report, released this morning, showed headline inflation rising 0.5% month-over-month and 4.2% year-over-year, while core CPI — which strips out food and energy — came in at 0.2% monthly, below the 0.3% forecast. The result: gold futures sank, dragging IAU to its lowest point since late March, and extending a brutal one-week drawdown from $84.28 to $77.48 — a drop of roughly 8%.
• Inflation Keeps Climbing, and the Fed Has No Reason to Cut. U.S. inflation rose to 4.2% in May, its highest level since April 2023, marking the third consecutive monthly acceleration driven largely by energy costs jumping 23.5%.
Goldman Sachs no longer expects the Fed to cut rates this year due to a stronger-than-expected labor market.
Markets are now pricing in roughly a 70% chance of a quarter-point rate hike in December. For gold, which pays no income, that math is punishing: every tick higher in yields makes Treasuries more attractive and bullion less so.
• Gold Spot Price Has Cratered Nearly $200 in a Single Day. Gold's spot price as of 9:00 a.m. ET Wednesday stood at $4,146.43 per ounce, down sharply from Tuesday's $4,340.70.
Over the past month, gold's price has fallen 10%, though it remains 28% higher than a year ago. IAU, which simply holds gold bars in a vault, mirrors this decline dollar-for-dollar after its 0.25% annual fee.
• Investors Are Already Pulling Money Out. IAU has seen $714 million in net outflows over the past month and $3.32 billion over three months.
North American gold ETFs turned modestly negative in May, recording $1.1 billion in outflows, as investors moved to the sidelines awaiting a clearer catalyst amid rising opportunity costs from dollar strength and higher rates.
• The Fed Meeting Next Week Could Make Things Worse. The FOMC convenes June 16–17 in its first meeting under new Chair Kevin Warsh, with a fresh set of economic projections and a press conference on the agenda.
Traders have already begun pricing in a 25-basis-point rate hike by December. If Warsh's debut signals a hawkish turn, real yields — the return investors earn on government bonds after subtracting inflation — would rise further, tightening the vise on gold. For IAU holders, the question is whether the Iran-driven energy shock that initially fueled gold's rally is now, paradoxically, destroying it by keeping the Fed locked in a high-rate posture.