Gold extends losses after worst quarter in 13 years on rate fears

Gold fell to $3,956.92 an ounce Wednesday, extending losses after the metal suffered its worst quarterly decline in 13 years as the Iran war stoked inflation fears.

"There's pressure on gold because people are not seeing much light at the end of the tunnel," Edward Meir, an analyst at Marex, said, citing the Middle East conflict that has driven a 25% drop in prices since late February.

Spot gold lost 1.5% on Tuesday and is down 12.7% in June, heading for its fourth straight monthly decline — the biggest monthly drop since October 2008. The metal has plunged 15% over the past three months, its steepest quarterly slide since the June quarter of 2013. US gold futures for August delivery fell 1.7% to $3,969.30. Earlier in the session, spot prices dipped below $4,000, a key support level, for the first time since early November.

The selloff has erased all of gold's gains from its January record high above $5,000. Markets now price in three Federal Reserve rate hikes this year, with a 64% probability of a September increase, according to the CME FedWatch Tool. Higher rates diminish gold's appeal as a non-yielding asset even as the metal traditionally serves as an inflation hedge.

"You have high inflation, high interest rate expectations, and a strong dollar, and that's overriding all other bullish factors that are typically associated with a gold rally," Meir said.

The US-Iran conflict escalating into a regional war sent energy prices sharply higher, reigniting inflation expectations and forcing the Fed toward a hawkish stance. Elevated crude oil prices fuel broader price pressures, raising the likelihood of rate hikes that strengthen the dollar and increase real yields — both bearish for gold. The US dollar index headed for a second monthly gain, making bullion more expensive for holders of other currencies. Oil prices were on track for their sharpest quarterly decline since 2020 as investors watched US-Iran talks in Doha.

The selloff extended across the precious metals complex. Silver fell 2% to $57.13 an ounce, platinum lost 1.1% to $1,557.21, and palladium slid 0.4% to $1,208.17. All three metals were headed for quarterly and monthly losses.

"Gold could see the $5,000 level again this year but this would be based on further de-escalation, oil having a sustained move to pre-war levels to dull the inflationary impact of the conflict, and a softer dollar," Tim Waterer, chief market analyst at KCM Trade, said.

Ole Hansen, head of commodity strategy at Saxo Bank, said prices first need to break above $4,100 before a short-term low can be established. Meir sees gold trading in a $3,500 to $4,400 range in the second half of the year.

This article is for informational purposes only and does not constitute investment advice.