Gold is on track to record its worst quarterly performance in 13 years. The commodity shed approximately 13% of its value in the second quarter of 2026. The front-month Comex gold future (GC00) hit its lowest price of the year late Monday, dropping near $3,975. It staged a modest recovery early Tuesday to trade around $4,040.
The steep decline contrasts sharply with gold’s historic run-up earlier this year. Bullion hit a record high of $5,318 at the end of January. It has since lost nearly a quarter of its overall value. Higher oil prices have stoked inflationary pressures, causing the U.S. dollar to strengthen.
Federal Reserve Rate Pressures Mount
Persistently high Federal Reserve interest rate expectations are driving the sell-off. Resilient inflation metrics and strong U.S. economic data have increased real yields. Higher real yields increase the opportunity cost of holding non-yielding bullion. This structurally dampens demand and pushes retail investors to abandon gold for other speculative bets.
Ole Hansen, head of commodity strategy at Saxo Bank, noted that gold’s bounce back above the critical $4,000 threshold appears driven by short-covering and bottom-fishing amid easing energy prices. But the recovery remains fragile. Hansen cautioned that gold must break above $4,100 to convince investors to confidently go long again.
Goldman Sachs Adjusts Market Outlook
The shifting macroeconomic environment is forcing major financial institutions to revise their strategies. Goldman Sachs recently responded to the prolonged high rates by lowering its price target for gold from $5,400 to $4,900 for year-end 2026. The firm cited fading ETF inflows and the removal of near-term rate cuts from its economic models.
Despite the severe short-term correction, the long-term case for gold retains structural support. Emerging market central banks continue to execute record-breaking physical purchases in an attempt to de-dollarize their reserves.