Gold futures recorded a 13.4% decline in the second quarter of 2025, marking the worst quarterly performance since the second quarter of 2013, as rate hike expectations and dollar strength weighed on the precious metal. August delivery gold futures closed at $4183.10 per ounce on July 2 (local time) at the New York Mercantile Exchange, according to Investing.com on July 6. The decline came as market participants began pricing in potential interest rate increases by the Federal Reserve under Chair Kevin Warsh, who has prioritized inflation control, while investor funds shifted toward growth assets including AI semiconductors and SpaceX's IPO.
Spot gold fell to $3943 per ounce intraday on June 30, the lowest level since November. Gold, a non-interest-bearing asset, faces reduced demand when interest rates rise as investors shift to yield-generating alternatives such as deposits and bonds.
Fed Rate Hike Expectations Drive Gold Decline
The CME FedWatch tool shows the market expects two to three interest rate increases this year, with the probability of a September rate hike reflected at over 60%. Inflation concerns intensified following oil price increases stemming from Middle East developments, prompting Fed Chair Kevin Warsh to designate price stability as the top priority.
Investor capital moved toward growth assets, diminishing gold's relative appeal. Investment demand concentrated on growth themes including artificial intelligence semiconductors and the SpaceX initial public offering.
Korean Gold ETF Outflows from June 2 to July 2
Individual investors in Korea sold ₩78.1 billion worth of 'ACE KRX Gold Spot' from June 2 to July 2, according to Korea Exchange data. Net sales of 'TIGER KRX Gold Spot' and 'KODEX Gold Active' reached ₩43.6 billion and ₩14.7 billion respectively during the same period.
Gold Rebounds 0.9% Intraday on July 2
International gold prices broke a two-day decline and rose 0.9% intraday on July 2, trading around $4066 per ounce. The rebound followed Fed Chair Warsh's remarks at the European Central Bank forum in Portugal on July 1, which market participants interpreted as less hawkish than anticipated, partially alleviating near-term rate hike concerns.
Goldman Sachs and UBS Issue Gold Outlook Statements
Goldman Sachs stated in a recent report that "Fed policy has become a key variable for gold prices," adding that "a prerequisite for gold prices to show strong upward momentum again is for the Fed to shift to dovish monetary policy."
UBS maintained a positive medium-to-long-term outlook, stating that "the probability of a near-term rate hike by the Fed is low, and the Fed's policy rate will eventually decline." The firm noted that central banks continue to expand gold holdings in response to geopolitical risks, suggesting buying interest may emerge near the $3900 per ounce level.
FAQ
What caused gold futures to fall 13.4% in Q2 2025?
Gold futures declined 13.4% in the second quarter of 2025 due to rate hike expectations and dollar strength. The CME FedWatch tool shows the market expects two to three interest rate increases this year, with over 60% probability for a September hike. Fed Chair Kevin Warsh prioritized inflation control, and investor funds shifted toward growth assets including AI semiconductors and SpaceX's IPO.
How much did Korean investors sell in gold ETFs from June 2 to July 2?
Individual investors in Korea sold ₩78.1 billion worth of 'ACE KRX Gold Spot', ₩43.6 billion of 'TIGER KRX Gold Spot', and ₩14.7 billion of 'KODEX Gold Active' from June 2 to July 2, according to Korea Exchange data.
What is Goldman Sachs's view on gold prices?
Goldman Sachs stated in a recent report that "Fed policy has become a key variable for gold prices," adding that "a prerequisite for gold prices to show strong upward momentum again is for the Fed to shift to dovish monetary policy."
