Gold prices fell to their lowest level in more than seven months on Wednesday after briefly dropping below the $4,000-per-ounce mark, pressured by a stronger US dollar and growing expectations for interest rate hikes.

Spot gold declined 2.9% to $3,981.21 per ounce after touching its lowest level since November 2025. US gold futures also fell 3.4% to settle at $4,008.80 per ounce.

The US dollar strengthened, making the precious metal, which is priced in the American currency, more expensive for holders of other currencies.

Interest rate hike expectations weigh on precious metals

Traders increased their bets on US interest rate hikes this year after the Federal Reserve adopted a hawkish tone at its latest policy meeting and as concerns persisted over inflationary pressures stemming from the war with Iran.

Tai Wong, an independent metals trader, said: "The market's pricing of a rate hike as early as September, driven by the Federal Reserve's hawkish stance, the dollar's rise to a 13-month high, and lower inflation expectations, are all placing significant pressure on precious metals."

He added: "For gold, there is support slightly below the $3,900 level, and central bank purchases remain ongoing, so a collapse is unlikely. However, an extended period of consolidation is possible because gold trading has currently moved out of the spotlight."

Gold becomes less attractive to investors when interest rates rise because it does not generate a yield.

Spot gold had reached a record high of $5,594.82 per ounce in late January but has since lost more than $1,600 per ounce.

Analysts at ING Group lowered their gold price forecasts and now expect gold to average $4,300 per ounce in the third quarter of 2026 and $4,600 in the fourth quarter, compared with their previous forecasts of $4,850 and $5,000 respectively.

Markets await US inflation data

Investors are also awaiting the release of the US Personal Consumption Expenditures (PCE) report on Thursday, the Federal Reserve's preferred inflation gauge, for further clues about the direction of monetary policy.

Lukman Otunuga, Senior Research Analyst at FXTM, said that additional hawkish signals from Federal Reserve officials or economic data supporting the need for higher interest rates could create further downside risks for gold.

As for other metals, spot silver fell 4.8% to $59.08 per ounce after hitting its lowest level since December 2025.

The closure of the Strait of Hormuz and the disruption of more than 10 million barrels per day of crude oil supplies from the Arabian Gulf have alerted import-dependent nations to the need for expanding their strategic and commercial storage capacity.

Many countries, particularly across the Asia-Pacific region, are seeking to build new storage facilities to strengthen energy security and avoid another major supply crisis like the one caused by the closure of one of the world's most important oil and LNG transit routes.

From India to Australia, energy importers are increasing their crude oil and fuel storage capabilities in preparation for the next energy crisis, amid an increasingly volatile geopolitical environment where disruptions are viewed as a question of "when" rather than "if."

Major oil producers are also considering expanding global storage facilities so they can continue marketing production during future disruptions that may shut down strategic trade routes.

The role of inventories in oil price movements

Before the conflict with Iran, most policymakers and analysts did not expect the Strait of Hormuz to become inaccessible to oil tankers.

Importing nations had long assumed that despite ongoing tensions in the Middle East, the strait would never actually close.

That assumption changed after shipping traffic was disrupted for nearly four months, while uncertainty over how quickly and smoothly the strait could reopen triggered an energy crisis across Asia, drained the US Strategic Petroleum Reserve to its lowest level since 1983, and pushed inventories at the WTI delivery hub in Cushing down to an operationally critical level of around 20 million barrels.

Expanding storage capacity could help reduce the impact of future supply shocks by limiting extreme price spikes during periods of disruption.

At the same time, filling those new storage facilities will require hundreds of millions of barrels of crude oil and refined fuels, creating additional demand in the short and medium term and supporting oil prices.

Inventory expansion plans

India, Singapore, Australia, and Pakistan are all seeking to strengthen their storage capacity to avoid future crises.

According to Reuters calculations, storage projects proposed in recent months could require roughly 500 million barrels of crude oil and fuels to fill the new facilities.

In addition, members of the International Energy Agency will need to rebuild approximately 400 million barrels that were released in March during the largest coordinated stockpile release in history.

Markets will also require additional barrels to offset current declines in global inventories amid strong seasonal summer demand.

Combining current and future inventory replenishment needs, additional demand could reach around one billion barrels of oil spread over several years, according to Reuters estimates.

That could help revive global oil demand beginning next year if shipping activity through the Strait of Hormuz returns to normal during the second half of this year.

India leads efforts to expand reserves

India is among the first countries moving to strengthen storage capacity. It is the world's third-largest crude oil importer but holds relatively modest reserves compared with China, which has accumulated more than one billion barrels of inventories.

India's underground strategic petroleum reserve capacity totals about 5.33 million metric tons of crude oil, equivalent to roughly 39 million barrels, enough to cover only around eight days of consumption.

The Hormuz crisis exposed India's vulnerability, prompting the government, according to reports, to ask state-owned ONGC to build and fill a new strategic reserve site at an estimated cost of $1.6 billion.

Pakistan, Singapore, and Australia boost storage

Pakistan is encouraging Gulf oil producers to establish strategic crude inventories in a planned energy city near Gwadar Port.

A Pakistani official told local media in May: "If crises such as war occur, Pakistan will have first rights to access these reserves."

Singapore, one of the world's largest oil trading hubs, said it is exploring underground storage solutions to increase fuel reserves.

Australia, meanwhile, remains unable to consistently maintain the International Energy Agency requirement of holding inventories equivalent to 90 days of consumption. The government plans to spend A$10 billion (about US$7 billion) to build larger fuel reserves.

During the recent crisis, Australia was forced to source jet fuel from China after global supply pressures intensified and one of its major refineries was shut down by a fire.

The Australian government is now seeking to establish a domestic fuel reserve by imposing minimum inventory requirements on companies while also expanding storage infrastructure through its diesel storage enhancement program.

Even producers want more storage

Plans to increase storage are not limited to importing countries.

Saudi Arabia, the world's largest crude oil exporter, is also considering expanding its global storage network.

Last week, Saudi Aramco Chairman Yasir Al-Rumayyan said the company already operates storage facilities around the world, particularly in Asia, adding: "We are seriously considering having larger storage facilities around the world."

Aluminum prices on the London Metal Exchange (LME) declined sharply, reaching their lowest levels in nearly three months after the United States granted Iran a 60-day sanctions waiver following preliminary peace talks.

The development strengthened expectations for the resumption of trade flows through the Strait of Hormuz, easing concerns over supply disruptions that had previously supported aluminum prices.

The LME cash aluminum bid price fell to $3,263 per metric ton on June 23, down from $3,403 per ton on June 22, a decline of 4.11%.

The cash offer price also dropped to $3,263.50 per ton from $3,405 per ton, marking a decline of 4.16%.

Benchmark aluminum contracts decline under market pressure

The benchmark three-month aluminum contract also moved lower, with the bid price falling to $3,269 per ton from $3,405 per ton, a decline of 3.99%.

The offer price for the same contract fell to $3,271 per ton from $3,406 per ton, down 3.96%.

Across the futures curve, the December 2027 aluminum contract also weakened, with the bid price declining to $3,115 per ton from $3,180 per ton, while the offer price fell to $3,120 per ton from $3,185 per ton, representing declines of roughly 2.04% in both cases.

The Asian benchmark price for the three-month aluminum contract on the LME stood at $3,232.50 per ton on June 23, reflecting the broader weakness prevailing in the aluminum market.

Exchange inventories decline as canceled warrants fall

Inventory data showed a slight decline in exchange-registered aluminum stocks, with opening inventories on the London Metal Exchange falling to 313,800 tons on June 23 from 315,300 tons on June 22.

The decrease amounted to 1,500 tons, or 0.48%.

Live warrants remained unchanged at 247,575 tons, while canceled warrants declined to 64,150 tons from 66,225 tons, a decrease of 2,075 tons, or 3.13%.

The decline in canceled warrants indicates a reduction in the volume of metal earmarked for withdrawal from LME warehouses.

Meanwhile, the alumina price, according to the S&P Global Platts benchmark, stood at $307.10 per ton.

Bitcoin (BTC) remains under pressure, trading near the $62,700 level on Wednesday after falling 2% the previous day.

Continued selling by institutional investors, alongside outflows from spot Bitcoin exchange-traded funds (ETFs) on Tuesday, continues to weigh on Bitcoin's performance.

Weak activity on the Chicago Mercantile Exchange (CME) is also signaling caution among traders, limiting the prospects for a recovery in the world's largest cryptocurrency.

Federal Reserve

At the same time, expectations for higher US interest rates have increased as Federal Reserve officials adopt a more hawkish tone amid the continued strength of the economy.

Tensions surrounding the framework agreement between the United States and Iran have also boosted demand for safe-haven assets after disagreements emerged between the two sides over several key issues.

According to the CME FedWatch Tool, markets are currently pricing in a 36% probability of a Federal Reserve rate hike at the July meeting, compared with 9% a week ago.

For the September meeting, the probability of a rate hike has risen to more than 70%, up from 29% previously.

Institutional money continues to leave Bitcoin funds

Institutional demand continued to weaken this week, with data from SoSoValue showing that spot Bitcoin ETFs recorded net outflows of $113.78 million on Tuesday, following outflows of $68.18 million on Monday.

If these outflows continue or accelerate in the coming days, Bitcoin could face a deeper price correction.

Derivatives traders remain on the sidelines

A report released by K33 Research on Tuesday indicated that CME data continues to reflect subdued and cautious activity, with no major changes from the trends that have prevailed throughout the year.

The annualized Bitcoin futures basis rose slightly to 5%, but remains at relatively low levels, while open interest declined by 4,730 BTC over the past week to 101,655 BTC.

This puts the CME on track to record its lowest level of open interest since October 2023 following the expiration of June contracts later this week.

At the same time, funding rates increased over the weekend and briefly reached an annualized 5%, their highest level since June 4, signaling a limited return of speculative long positions.

A K33 Research analyst said: "Positioning levels and overall activity remain weak, with no meaningful shift from the quiet market conditions that have characterized most of the year."

The analyst added that the absence of institutional momentum and strong derivatives activity continues to limit Bitcoin's recovery prospects in the near term.