Gold set for worst quarter in 13 years as Fed turns hawkish

Gold is closing the second quarter with its steepest three-month loss in more than a decade, as a hawkish Federal Reserve, a firmer dollar and renewed inflation fears strip the shine off the year’s most crowded macro trade.

The headline number

About 16% was wiped off gold in the three-month period ended June 30 — its worst quarter since the second quarter of 2013. Gold has fallen 7.76% year-to-date.

Spot prices broke below $4,000 on June 24 for the first time since November, then sank to about $3,942 on the final morning of the quarter before clawing back. By the closing bell, bullion was down more than 11% for the month, its steepest monthly fall since October 2008.

Why the trade broke

The precious metal was headed for its first quarterly decline since 2024 and its steepest retreat since the June quarter of 2013. Although gold is typically seen as a hedge against inflation, higher rates tend to weigh on the non-yielding metal.

Further weighing on bullion was a stronger dollar, set for a second straight monthly gain as markets priced in higher odds of Fed rate hikes. The 10-year Treasury yield sits near 4.39%, and the futures market puts the odds of a September rate hike at about 64%.

Sentiment has flipped

“The failure to sustain gains (for gold) highlights the current fragile sentiment, where traders continue to sell into strength rather than buy into weakness, a notable shift from the behaviour seen over the past few years,” said Saxo Bank analyst Ole Hansen.

UBS commodity analyst Giovanni Staunovo said gold’s traditional safe-haven appeal has been offset lately by stronger-than-expected U.S. economic data, higher real yields, a firmer dollar and less dovish market view on the Federal Reserve’s rates path.

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The bull case that is still standing

Central banks bought a net 244 tonnes of gold in the first quarter, a pace that has barely flinched as prices dropped, according to the World Gold Council. Governments buy bullion for reasons that have nothing to do with a quarterly chart, and that steady demand is what keeps a correction from becoming a collapse.

J.P. Morgan has projected that gold prices could recover to approximately $6,000 per ounce by the end of 2026, which would represent a roughly 50% rally from current levels. OCBC, meanwhile, cut its year-end 2026 forecast for gold to $4,360 per ounce from $5,100, and reduced its silver forecast to $67 per ounce from $89.50.

The level to watch

The line to watch now is $4,000 an ounce, the level analysts have flagged as the market’s next real test. A clean break below it could trigger another wave of selling from ETF holders heading for the exits. A hold could pull in bargain hunters who see the 28% drop as an overcorrection rather than a verdict.

“Prices first need to break above $4,100 before it is reasonable to consider that a low may have been established,” Hansen added.

Options market and stocks to watch

Traders looking for exposure to the gold complex should keep an eye on the following names as the metal tests $4,000:

GLD: The SPDR Gold Shares ETF is the cleanest proxy for spot. Watch for ETF outflow-driven flow if $4,000 breaks.

IAU: The iShares Gold Trust tracks the same move at a lower expense ratio, and often sees hedging flow when spot gets volatile.

GDX: Miners tend to amplify moves in the underlying. Watch for downside skew if bullion cannot hold the line.

NEM: Newmont is the largest producer and a barometer for sentiment on the majors.

SLV: Silver is having its worst quarterly decline since the first quarter of 2020, so watch for correlated flow and pair trades against gold.

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