Gold's 12% June rout deepens as Fed freezes structural rally

The Federal Reserve's hawkish pivot has transformed what J.P. Morgan called a "pause" in gold's structural bull market into a prolonged freeze, with the metal suffering its steepest monthly decline since 2008.

Gold posted its biggest monthly drop since the 2008 financial crisis, sliding 12% in June, as the Federal Reserve's hawkish stance crushed expectations for a near-term pivot.

"The Fed has turned what we viewed as a pause in the structural bullish gold story into a deeper freeze," Gregory Shearer, head of Base and Precious Metals Strategy at J.P. Morgan, said in an interview.

COMEX gold futures corrected approximately 12% during June, with the metal briefly dipping below $4,000 an ounce before short covering lifted prices back toward that level, according to exchange data. The Dollar Index rebounded above 101, its highest level in months, as traders priced in additional rate hikes following the Fed's updated dot plot. In India, gold prices tumbled about Rs 15,000 per 10 grams during the month, with 22-carat gold settling near Rs 13,110 per gram at major retailers.

The selloff marks the largest quarterly decline for gold in years, erasing gains built during the first quarter when geopolitical tensions and central bank buying had pushed prices to record levels. Shearer said base metals now offer more attractive near-term opportunities compared with precious metals, as industrial demand drivers provide clearer reasons for investment. Investors are watching this week's US employment data — including ADP payrolls and non-farm payrolls — for further clues on the Fed's rate path.

Base Metals Outperform as Gold Falters

Shearer's call for a rotation into base metals reflects a growing divergence in commodity markets. While gold has struggled under the weight of rate expectations, LME copper has held above $9,000 per tonne, supported by declining warehouse stocks and production disruptions in Chile. "The near-term risk-reward in base metals looks more compelling," Shearer said, citing specific supply-side events that precious metals currently lack. Aluminum and nickel have also outperformed gold this quarter, benefiting from supply constraints and steady industrial demand.

Key Levels and What's Next for Gold

Gold's ability to hold the $4,000 level will be a key technical test in the coming sessions. A stronger-than-expected US payrolls report would reinforce the Fed's hawkish stance and potentially push gold below that threshold, while a weaker print could trigger a relief rally. The metal's 12% June decline compares with a roughly 5% drop in silver and more moderate losses in platinum, showing gold's particular sensitivity to rate expectations. COMEX gold warehouse stocks have drawn attention, though inventory data has played a secondary role to macro factors this month.

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