TL;DR

• After Warsh hosted the FOMC for the first time, the Federal Reserve maintained interest rates, but the description of inflation and energy shocks reinforced expectations of high rates.
• Gold and silver fell alongside South Korean AI semiconductors; the core issue is not the failure of safe havens, but rather that real interest rates and the dollar are reestablishing dominance in asset pricing.
• Related assets: Gold, silver, dollar index, 10-year US Treasuries, KOSPI, Samsung Electronics, SK Hynix, Micron, Nvidia.

Since June, the KOSPI in South Korea has fallen over 8% due to the drag from semiconductor-weighted stocks, triggering a circuit breaker, and gold and silver also retreated within the same time frame.

The anomaly lies in the fact that if it were merely a traditional risk appetite decline, investors would typically sell stocks and buy gold. However, this time, risk assets and precious metals were sold together. The South Korean market provides an extreme example: core stocks in the AI supply chain, such as Samsung Electronics and SK Hynix, fell, while gold and silver faced pressure simultaneously. The current market is not trading on "where is the safest," but on "the cost of holding uncertain assets has increased."

This cost is real interest rates. Simply put, real interest rates are the true cost of capital after accounting for inflation expectations. When they rise, the appeal of bonds and cash increases, and assets like gold and silver, which do not generate interest, become less attractive; high-valued tech stocks will also see valuation compression because a higher discount rate makes future profits less valuable.

Therefore, the circuit breaker in South Korea is a superficial shock; the synchronized drop of gold is the more critical signal. The narrative supporting the rise of AI semiconductors and precious metals in 2025 is being tested by the same macro variable. This does not necessarily indicate the end of the AI bull market, nor does it suggest the failure of gold as a safe haven, but it at least indicates that under Kevin Warsh's leadership, the Federal Reserve's stance has hardened, and interest rates and the dollar have regained short-term pricing power.

Gold Under Pressure, Opportunity Cost Precedes Safe Haven Demand

Gold does not rise in times of panic at all times. Its greatest fear is not merely a stock market decline, but rather a strong dollar and rising real interest rates.

After Kevin Warsh was sworn in as Federal Reserve Chair on May 22, the FOMC maintained the target range for the federal funds rate at 3.50%-3.75% on June 17. On the surface, this appears to be a standstill; however, the statement continued to emphasize that inflation remains above the 2% target and mentioned supply shocks, including energy, that have pushed up certain prices.

For the market, this is more important than whether to raise interest rates immediately. Prior to this, investors were betting on a shift towards easing, but now are faced with the prospect of high rates persisting longer, or even the risk of rate hikes re-entering pricing.

The drop in gold and silver occurred after this macro anchor changed. On June 24, mainstream market sources showed that gold had fallen below $4100 per ounce, with Trading Economics quoting as low as around $4069, leaving only about 2% of space to the key $4000 mark. This level is important not just because it is a psychological barrier but also because many technical analyses view $4000 as a key support zone for this round of correction. After breaking below $4100, the market was no longer merely trading on an ordinary pullback but rather on whether gold would formally test the $4000 support.

If $4000 is effectively broken, the issue is not simply how much lower it can fall, but rather assessing whether the pullback could escalate into a sharp drop. Gold had significant gains previously and thick profits in holdings; once the integer level gives way, short-term stop-losses, trend funds reducing positions, ETF outflows, and margin pressure may occur simultaneously. At that time, gold still has long-term supports such as central bank purchases and safe haven demand, but short-term prices will first bow to liquidity and risk control, and market confidence in "gold can defend" may be tested again.

This is not to say that geopolitical risks, central bank purchases, and industrial demand are unimportant. The surge in gold in 2025 was indeed supported by central bank purchases, a weaker dollar, and safe haven demand; silver's even larger increase is also related to its industrial properties and supply-demand expectations. However, when interest rate expectations are suddenly revised upwards, precious metals will be revalued first as non-yielding assets.

The reasons for investors to hold gold have not disappeared; they are just temporarily suppressed by higher opportunity costs of capital. Risk events will stimulate safe haven buying, while high rates will increase the cost of holding gold. When the latter dominates, gold can fall alongside stocks.

Gold and Silver Falling Together Indicates Market is Selling Liquidity

The decline in both gold and silver cannot simply be interpreted as "the failure of safe haven assets." More accurately, the market is repricing liquidity.

When easing expectations are strong, gold can benefit simultaneously from a weaker dollar, falling real interest rates, and safe haven demand; silver will further benefit from its industrial properties and supply-demand expectations, providing greater elasticity. However, when the Federal Reserve starts to signal a more hawkish stance, the pricing logic reverses: a stronger dollar depresses gold and silver priced in dollars, rising real interest rates increase the opportunity cost of non-yielding assets, and the market will also proactively reduce positions that exhibit greater volatility.

This is also why gold and silver decline alongside stocks. They belong to seemingly different asset classes on the surface, but in short-term trading, they both rely on the same variable: the cost of capital. If capital becomes more expensive, the market will first sell off the most crowded, most profitable, and most liquid positions, rather than first distinguishing whether these assets still hold long-term relevance. Silver is more sensitive because it additionally incorporates industrial attributes; once risk assets pull back simultaneously, expectations for industrial demand will also be discounted.

Hence, the core of this decline is not "why gold is not acting as a safe haven," but rather that the direction of market risk aversion has changed. Under higher rate expectations, the safe haven assets that capital may temporarily choose could be dollars, cash, and short-term bonds. Gold remains a long-term safe haven tool, but during the rapid revaluation phase of interest rates, it will first be impacted by opportunity cost.

South Korea is a Magnifying Glass, Not the Cause of Precious Metals Decline

The reason the sharp decline in the South Korean market is observed in the same chart is not because South Korean semiconductors directly determine gold prices, but because it magnifies the same macro trading pressures.

The South Korean stock market benefited from the demand for AI memory in 2025, with semiconductor-weighted stocks like Samsung Electronics and SK Hynix driving a significant increase in the index. By 2026, the issue becomes: if too much capital is crowding in one direction, once macro rates rise, who sells first and how much could affect prices more than short-term changes in company fundamentals. The KOSPI dropped over 8% in June and triggered a circuit breaker as this crowded trade was re-evaluated.

However, it is important to clarify the causality here. Current public evidence cannot prove that "deleveraging in South Korea directly infects global precious metals positions." A more prudent judgment is that both South Korean semiconductors and precious metals are simultaneously under the same macro pressure: rising rates, a strong dollar, and expensive liquidity. The South Korean market reacts more violently due to index concentration and crowded AI positions; gold and silver, due to their non-yielding properties and dollar-denominated pricing, are directly exposed to interest rate revaluation.

In other words, South Korea is not the reason for gold's decline; rather, it is a display screen for market risk appetite and leverage status. It signals to investors: when high rate expectations rise again, assets that have risen significantly and held heavy positions over the past year will be scrutinized first. Although precious metals are not tech stocks, they also need to accept repricing when funding costs rise.

AI Volatility Affects Sentiment, but Gold and Silver Still Look to Rates

The volatility of AI semiconductors will affect market sentiment and also influence assets like silver that possess industrial properties, but it is not the mainline explanation for gold and silver trends.

If the key variable for gold and silver is real interest rates, then the key variable for AI semiconductors is order fulfillment. Micron's financial report can serve as a window to observe risk appetite, as it will affect the market's judgment on "whether high-valued assets can still withstand high rates." If the financial reports of the AI chain continue to be strong, risk appetite may receive support, and silver's industrial attributes may be repriced more easily; if the guidance falls short of expectations, the market may further reduce positions in growth assets, and continuing contraction in risk appetite may further suppress high-elasticity assets.

However, the core of gold's pricing must return to the Federal Reserve, the dollar, and real interest rates. Even the best AI financial report is unlikely to directly offset the pressure of rising real interest rates on gold; a weakening in AI financial reports does not necessarily push gold higher, unless it simultaneously triggers expectations for rate cuts, a weaker dollar, or stronger safe haven demand.

This illustrates the difference between market revaluation and fundamental falsification. Revaluation occurs when the discount rate changes, allowing investors to assign a lower valuation to the same profits; falsification means there is a problem with demand itself, and future profits need to be downgraded. For precious metals, the current priority is the former: the market is first reassessing gold and silver against higher capital costs rather than altering long-term safe haven logic based solely on changes in a particular industrial chain.

Rates and the Dollar are Validating This Round of Decline

The conclusions that are easiest to overstate right now equate simultaneous declines directly with the end of trends. Just because gold has fallen does not mean the gold bull market is over; nor does a circuit breaker in South Korea mean AI demand has collapsed. A more reasonable positioning is that the market has entered a validation window: rate pressures first compress valuations and non-yielding asset prices, followed by awaiting data to confirm whether this is a pullback or a reversal.

The Federal Reserve under Warsh is the first validation line. If subsequent inflation and employment data continue to show strength, and energy prices maintain pressure, the FOMC's hawkish tone may further translate into clearer rate hike expectations. At that point, gold and silver will face not just a short-term technical pullback but more persistent pressure from real interest rates.

The dollar is the second validation line. Gold and silver are priced in dollars, and a strong dollar will directly increase holding costs for non-dollar investors, while also weakening short-term demand for precious metals. If a strong dollar occurs alongside rising real interest rates, precious metals usually find it more difficult to reverse pressure solely through the narrative of safe haven.

Silver has an additional validation line: industrial demand expectations. It is more easily influenced by the sentiment of risk assets than gold, and also experiences amplified volatility when growth expectations change. If AI, semiconductors, and other high-elasticity assets continue to face pressure, silver may simultaneously undergo a dual revaluation of its precious metal attributes and industrial properties.

The decline of gold and silver alongside AI stocks reminds investors that seemingly different assets in their portfolios may expose similar risks under the same macro variable. Winners in trades in 2025 may not simultaneously lose their fundamentals by 2026, but will face higher capital costs together. The real variables affecting precious metal prices moving forward are how long the pressures from rates and the dollar can last, and whether safe haven demand, central bank purchases, and industrial demand can increase quickly enough to offset this pressure.

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