(Kitco News) – Gold and silver prices should soon begin to benefit from lower oil prices as inflation expectations moderate and bond yields drop, while developments on the Pacific Rim suggest the gold market’s center of gravity may be shifting East, according to precious metals analysts at Heraeus.
In their latest update, the analysts noted that precious metal prices remained under pressure amid the renewed strength of the U.S. dollar.
“Gold fell below $4,000/oz for the first time since November 2025 last week, as the market continued to price in a more hawkish Federal Reserve,” they wrote. “The implied probability of a rate hike at the 29 July FOMC meeting is hovering around 35%, up from less than 10% before last week’s meeting. The likelihood of higher rates has bolstered the dollar, which has risen to its strongest level since May 2025."
"The US Dollar Index rose above 101.5, having hit its 52- week low just above 95.5 at the height of the precious metals price rally earlier this year," they added. "While a strengthening dollar does not always mean weaker precious metals prices, the same macro factors often affect both, with a stronger dollar also making precious metals more expensive for non-dollar buyers.”
Meanwhile, China’s gold imports rose to their highest levels in two years last month.
“China imported 162.6 tonnes of gold in May, up from 99.5 tonnes in May 2025, an increase of 63% year-on-year,” the analysts wrote. “So far this year, non-monetary gold imports to China total 691.6 tonnes. This is up 76% from 393.6 tonnes year-on-year for the January to May period, though it does not quite reach the 840.6 tonnes imported over the same period in 2024. This was driven by robust demand for physical bars and gold accumulation plans where retail investors can buy gold with smaller amounts of money deposited each month.”
“While imports were higher, wholesale demand was down 36% year-on-year, making it the weakest May since 2010,” they added, “as jewellers put off purchases owing to recent pullbacks from high gold prices.”
And Hong Kong banks are building up their gold inventory before the launch of the much-publicized clearing system next month.
“At least four of the 11 banks participating in Hong Kong’s planned gold clearing system are importing 400-ounce London Good Delivery gold bars ahead of the mechanism’s expected launch in July,” the analysts said. “The move signals both Hong Kong’s ambition to strengthen its role as a regional bullion hub and Asia’s growing importance in global bullion markets, since it comes ahead of Singapore planning to open its own gold clearing mechanism later this year. In May 2026, the Hong Kong government set a target of achieving over 2,000 tonnes of gold storage capacity within three years by encouraging the Airport Authority Hong Kong and financial institutions to expand storage capacity, highlighting the potential size the bullion market could reach.”
Spot gold is still trading close to its session low on Monday morning, last trading at $4,035.33 for a loss of 1.30% on the session.
Turning to silver, Heraeus analysts pointed out that silver prices have also continued their slide following the Fed’s latest meeting.
“The price of silver fell below the $60/oz mark for the first time since December 2025,” they wrote. “This means the price now sits below key support around the $61/oz level. This comes as the US Personal Consumption Expenditures (PCE) price index came in as expected at 4.1% year-on-year, up from 3.8% last month and still well above the Fed’s 2% target.”
But the ongoing moderation in oil prices will likely lower inflation expectations, which could reinvigorate the precious metals market.
“Oil prices have returned close to their pre-war levels with Brent Crude down below $75/bbl, having traded at over $100/bbl for large parts of the conflict,” the analysts noted. “If no further closures of the Strait occur, the lower oil prices will begin to be passed on to producers and consumers. If this happens and the PCE price index falls, along with other indices, the likelihood of rate hikes will also reduce, strengthening the investment case for precious metals.”
Silver prices have risen off their earlier lows and are trading near the middle of their daily range on Monday morning.
Spot silver last traded at $58.187 per ounce for a loss of 1.69% on the daily chart.
