Following the outbreak of the US-Iran conflict, a surge in oil prices fueled inflation and expectations for Federal Reserve rate hikes, leading to a four-month period of pressure and adjustment in the precious metals market. Craig Hemke, an analyst at Sprott Asset Management, presents a core thesis: the price lows established by gold and silver at the end of June represent the bottom for the entire year of 2026. As geopolitical tensions ease and crude oil prices retreat, inflationary pressures are expected to cool rapidly. Market expectations for extremely hawkish monetary policy have peaked, and the Federal Reserve's policy is set to return to a rate-cutting path, allowing gold and silver to once again benefit from their long-term bullish fundamentals. However, technical repair will require time, making a sharp V-shaped recovery unlikely in the near term. The market is expected to be dominated by range-bound consolidation to absorb bearish signals, with the 20-day moving average serving as a key observation point for confirming an effective bottom.

Geopolitical Conflict Shifts Rate Cut Expectations, Precious Metals Face Sustained Adjustment

At the beginning of 2026, the overall market environment leaned towards easing, with inflation continuing to decline from its 2022 peak. The market widely anticipated that the Federal Reserve would initiate rate cuts in the middle of the year, with a maximum of two cuts expected for the full year.

Hemke notes that the US-Iran conflict at the end of February fundamentally altered the original macroeconomic trajectory. Crude oil prices surged to around $119, and rising energy costs directly pushed up inflation expectations. The market began aggressively betting on sustained Fed rate hikes, triggering a four-month downward adjustment for gold and silver.

As large-scale confrontations between the two sides largely ceased in June, crude oil prices retreated to their pre-conflict range, removing the core variable that had driven short-term inflation. In the PCE price index, a key metric monitored by the Fed, the energy component surged by 21% from March to May. With oil prices now lower, inflation data in the second half of the year is highly likely to show a sustained decline, gradually easing market fears of further rate hikes.

Hawkish Policy Expectations Have Peaked; Fed Rate Cuts Remain the Primary Theme for the Year

Hemke's analysis suggests that following the June FOMC meeting, the market has reached a "peak in extreme hawkish expectations." Previous market bets on multiple rate hikes were significantly disconnected from fundamentals. This year, there is only a slim possibility of a single symbolic rate hike, with no fundamental basis for consecutive, multiple hikes.

As inflation risks gradually subside, the Fed's policy focus is expected to revert to the regulatory approach outlined when the new Chair, Kevin Warsh, took office. This involves using rate cuts to lower overall societal borrowing costs and re-establish a negative real interest rate environment—a core driver supporting the long-term bull market for precious metals. Based on this macroeconomic projection, the lows hit by gold and silver at the end of June are highly likely to represent the annual price bottom.

Technical Damage is Significant; Near-Term Focus is on Consolidation and Base-Building

Hemke cautions investors that gold and silver are unlikely to stage a rapid, steep V-shaped rebound. The recent deep decline has caused substantial damage to technical patterns. Currently, gold and silver prices are trading below all key moving averages, maintaining an overall bearish technical structure. In the short term, the market is more likely to experience range-bound, sideways consolidation, relying on an extended period of lateral movement to repair oversold indicators and shift market sentiment away from pessimism.

Investors are advised to closely monitor the 20-day moving average, a key short-term trend divider. Once gold and silver prices stabilize above this moving average, it would provide further confirmation that the annual bottom has been established, officially opening a window for long-term allocation.

Conclusion

Considering multiple dimensions—geopolitics, energy, inflation, and monetary policy—the short-term inflationary shock caused by the US-Iran conflict has dissipated, with oil prices stabilizing. In the second half of the year, US CPI and PCE inflation readings are highly likely to fall below market expectations, marking the definitive end of the extreme hawkish rate hike narrative.

Although gold and silver still require a period of consolidation to complete their technical repair, the annual price lows have been identified. The monetary, safe-haven, and asset diversification logic that drove the precious metals bull market from 2024 to 2025 is poised to regain dominance. In the second half of the year, the gold and silver markets are expected to gradually recover and resume their upward trajectory.