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Gold heads for worst quarter in more than a decade as retail frenzy fades
Expectations of higher interest rates fuelled by Iran war help end bullion’s record rally
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Leslie Hook in London
PublishedJune 30 2026
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The price of gold fell below $4,000 a troy ounce on Tuesday as it headed for its worst quarterly performance in more than a decade, amid expectations of higher interest rates and dwindling enthusiasm among retail investors.
The price of bullion dipped just below $3,943, its lowest level since November, in early trading before recovering slightly, leaving it down nearly 14 per cent over the past three months.
Having rocketed to a record high of nearly $5,595 in January, driven by frenzied speculation among retail traders, gold has been hit hard as the hawkish stance of new US Federal Reserve chair Kevin Warsh boosts expectations of interest rate rises this year.
“The dominant drag for gold is the market realisation that the Fed’s new head is concerned about inflation, he is going to go after it [with rate rises],” said Tom Price, analyst at Panmure Liberum. “As a result, gold is pulling back.”
As a non-yielding asset, gold typically suffers during periods of high borrowing costs, which make interest-bearing assets, such as Treasuries and other bonds, relatively more attractive.
After two years of a near-continuous rally, gold has been on a rollercoaster this year. As war in the Middle East has driven up oil prices and fuelled expectations of higher inflation and interest rates, bullion prices have dropped, leading many investors to quickly dump their leveraged positions.
Some traders have also sold gold to fund bets on soaring AI stocks and chipmakers, or SpaceX’s record IPO, analysts say.
In recent weeks, outflows from gold-backed exchange traded funds, combined with new restrictions by some Chinese banks on bullion trading by retail investors, have further weighed on the price. June is on track to be the second consecutive month of net outflows from gold ETFs, according to data from trade body the World Gold Council.
“There isn’t just one catalyst,” said Nicky Shiels, analyst at MKS Pamp. “The narrative has moved on to AI and SpaceX . . . and inflation metrics just aren’t as supportive for gold.”
She pointed to a stronger dollar — in which gold is mostly priced — as well as ETF outflows, uncertainty around the Fed and the decline of the so-called “debasement trade” as contributing to bullion’s decline. The “debasement trade” refers to investors moving out of fiat currencies and into assets such as gold or bitcoin.
Chinese banks ICBC and China Guangfa Bank have moved to restrict precious metals futures trading for retail clients from next month, reflecting regulators’ concerns about investors betting on gold and silver. Chinese investors are still able to buy and sell physical gold bars and coins.
“Anything designed to curb buying, it can’t be positive,” said Nitesh Shah, head of commodities at WisdomTree. However, he added he expected that central bank demand could help provide a floor for gold prices.
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Read Original at Financial Times →