Key facts
- Gold is on track for its worst quarterly performance in over a decade.
- The price of gold fell below $4,000 per troy ounce on Wednesday.
- Gold prices are down 14% in the second quarter.
- Retail investors are cooling on gold due to expectations of higher US interest rates.
- Gold ETFs experienced net outflows of $2 billion in May.
Gold is set to record its worst quarterly performance in over a decade, with prices falling below $4,000 per troy ounce as retail investor interest wanes. The precious metal hit $3,978.5 on Wednesday, down 14% in the second quarter, its worst performance since 2013. This marks a significant downturn from its near-record high of $5,595 in January.
Analysts attribute the decline to expectations of higher US interest rates, driven by resilient economic data and persistent inflation. Federal Reserve chair Kevin Warsh's anticipated speech is closely watched for signals of a rate hike, which typically disadvantages non-yielding assets like gold. Investors are reportedly shifting towards higher-yielding assets such as bonds.
The "dramatic rollercoaster ride" for gold began as Middle East conflict fears initially boosted oil prices and inflation expectations, prompting investors to cash in on earlier gains. May saw $2 billion in net outflows from Gold ETFs, a trend expected to continue, with $4.7 billion in outflows recorded in the week ending June 26.
Furthermore, investors are diverting capital towards leading AI and tech stocks, as well as SpaceX's IPO, with analysts predicting this "AI euphoria" to continue impacting the gold market. Industry experts question gold's ability to rebound to previous highs without a significant geopolitical shock or a reversal in interest-rate expectations. The World Gold Council noted that while central banks are maintaining reserves, the pace of their purchases is under scrutiny.