Spot gold fell below $4,000 an ounce on Tuesday, touching $3,943 at one point before recovering slightly, and is on course for a quarterly loss of more than 13%—the steepest since the second quarter of 2013 and its first quarterly decline since 2024. The monthly drop of around 12% marks a fourth consecutive monthly fall, the longest such streak in 18 years. Futures for August delivery settled marginally lower at $4,038.50 on the Comex.

The sell-off is driven by a strengthening US dollar, which is heading for its second straight monthly gain, and a recalibration of Federal Reserve policy expectations. Markets now price a 64% probability of a rate increase in September, with three hikes seen by year-end, according to CME FedWatch data. Higher energy prices, fuelled by Middle East tensions, have revived inflation concerns, prompting the Fed under Chair Kevin Warsh to maintain a hawkish stance. Since gold yields no interest, rising rates diminish its appeal relative to yield-bearing assets, and the dollar’s advance makes bullion more expensive for non-dollar buyers.

Analysts in London note a behavioural shift: traders are now selling into rallies rather than buying dips, a pattern not seen in recent years. Swissquote describes a medium-term bearish consolidation, while Société Générale sees no visible signs of a significant recovery, identifying $4,100 as initial resistance. Outflows from gold-backed ETFs have accelerated; the World Gold Council reports that June is set to be the second consecutive month of net redemptions. In China, major banks including ICBC and China Guangfa Bank are restricting retail precious metals futures trading from next month, curbing a key source of speculative demand. Some investors have also rotated into AI equities and the SpaceX IPO, further draining gold positions.

Central bank reserve managers still view gold as the most desired asset to acquire, according to an OMFIF survey, which may provide a floor. Near-term pressure persists, however. The market now awaits US ADP private payrolls and non-farm payrolls data for clues on the Fed’s rate path. Simultaneously, US-Iran talks in Doha remain a wildcard; Tehran has denied reports of a new round, while Washington says discussions are set to begin. The outcome could influence energy prices and, by extension, inflation expectations and gold.