Gold heads for worst quarter in over a decade as retail frenzy fades, rate bets rise

Key Facts

In a paradoxical twist amid escalating Middle East tensions, gold is heading for its worst quarter in more than a decade. According to a report from the Financial Times, the selloff is driven by rising expectations of higher interest rates fueled by the Iran war, which has ended the metal's record rally. The fading retail-investor frenzy has also weakened demand, as individual traders were a key driver of prices in previous periods.

This sharp decline comes at a time when gold was expected to benefit from geopolitical uncertainty as a safe haven. However, the market's focus on the Iran war's implications for interest-rate policy has inverted that traditional logic, with traders now betting on a more hawkish monetary stance. The metal also faces additional pressure from strong US economic data: GDP growth for the first quarter came in at 2.1% (per market data), beating forecasts and reinforcing the case for further rate hikes.

On the technical front, markets are watching key support levels after the steep drop. Investors are eyeing today's Core PCE Price Index release, which could determine the Fed's next moves and gold's trajectory in the third quarter. Any signal of continued monetary tightening could push the metal even lower.