Gold suffered its deepest quarterly loss since the 2008 financial crisis as a hawkish repricing of Federal Reserve policy expectations erased more than $1,550 from the January record.
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Gold posts 12% monthly loss in Q2 as Fed repricing weighs
Gold fell 12% in June to around $4,040 an ounce, its biggest monthly drop since October 2008, as the market repriced Federal Reserve rate expectations following Chairman Kevin Warsh's first policy meeting.
"The scale of the selloff reflects a wholesale repricing of Fed expectations following Chairman Warsh's first meeting," Commerzbank analysts said in a note dated June 30. "The market is now pricing in a higher-for-longer rate path."
The precious metal has declined 23% from its January all-time high of $5,597.23, according to Forbes Advisor data. The drop follows a 150% rally from early 2024 to early 2026 that was driven by central bank buying and inflation hedging. COMEX gold futures open interest has fallen 18% since late January, reflecting institutional liquidation. Poland purchased 18 metric tons of gold in May and China bought 10 metric tons, World Gold Council data shows.
The next catalyst for gold comes with the July Fed meeting, where markets will watch for any shift in tone from Warsh that could reverse the rate repricing. A quarter-point cut would mark the first easing since the Fed began its tightening cycle.
UBS said in a June 25 note that investors are overestimating the hawkishness of the Fed, and the central bank's next move is more likely to be a cut than a hike. The bank forecasts gold will recover to about $5,200 an ounce over the next 12 months, representing a 28% upside from current levels.
"A weaker dollar has historically been a powerful tailwind for gold," Ulrike Hoffmann-Burchardi, UBS's global head of equities, said in the note. The bank cited stretched long positioning in the dollar and rising US fiscal deficits as factors that should weaken the greenback.
Other banks have taken a more cautious view. Goldman Sachs cut its 2026 year-end target to $4,900 an ounce from $5,400, while ING lowered its forecast to $4,600 from $5,000, according to their published reports.
Global central bank demand should remain a structural floor for prices, with annual purchases expected to stay steady, UBS said. The bank recommended a mid-single-digit allocation to gold for portfolio diversification, citing its low historical correlation with traditional asset classes.
Gold at current levels trades 28% below its January peak and 11% below its 52-week average of about $4,540, based on Forbes Advisor data. The 52-week intraday low stands at $3,248.98, set during the June selloff.
This article is for informational purposes only and does not constitute investment advice.
