Gold price selloff explained: Why investors are pulling back

Gold prices are on track for their biggest quarterly decline since April 2013, having fallen roughly 24% from their late-January all-time high near $5,589/oz, with the Gold Futures August contract trading at $4,031.70 today.
The selloff has been driven by a tightening vice of dollar strength and rising U.S. rate-hike expectations. The U.S. Dollar Index futures are near a 13-month high, as investors reprice Federal Reserve policy in the wake of hawkish signals tied to persistent inflation pressures stemming from the Middle East conflict.

Gold, which pays no yield, is acutely sensitive to the prospect of higher real rates, and the metal has now shed more than 6% year-to-date after briefly slipping below the key $4,000/oz psychological level for the first time since November 2025 on June 24.

Options markets are flashing an unusually bearish signal. For the first time since 2016, gold’s put/call skew has turned positive, meaning traders are now paying more for downside protection than upside exposure.

Goldman Sachs commodity co-head Samantha Dart flagged the shift as a meaningful sentiment marker, noting that tail-risk pricing has rotated away from upside energy calls and toward gold puts. Yet Dart stopped well short of turning bearish on the metal’s longer-term trajectory.

“Gold is not done,” she wrote in a note published June 29. “We continue to see further upside, driven by both structural and eventually cyclical factors. Structurally, EM central bank diversification — following the 2022 freezing of Russia’s reserves — remains the anchor of our $4,900/toz end 2026 forecast.” Goldman’s target implies a rebound of roughly 21% from current levels before year-end.
An OMFIF survey of 90 central banks, public pension funds and sovereign wealth funds, released June 30, found that for the first time, more central banks plan to cut dollar allocations than increase them over the next decade.

Gold “has moved to the centre of reserve management strategy,” with a net 30% of respondents planning to boost gold holdings over the next one to two years. OMFIF senior economist Yara Aziz noted that “the old assumption that public investors can wait for the environment to normalise looks increasingly unrealistic.”

Goldman also highlighted a structural deterioration in gold’s portfolio utility. During the onset of the Middle East war, commodities including gold were negatively correlated with the S&P 500, providing genuine diversification. That relationship has since flipped to positive correlation, reducing hedging value while simultaneously making gold more vulnerable to dollar-driven selling.

With the quarter closing Tuesday, investors are watching a dense run of U.S. macro data that could reinforce or soften the hawkish rate narrative. ADP Nonfarm Employment Change for June, due July 1, carries a consensus forecast of 118,000, followed by the June Nonfarm Payrolls report on July 2, where analysts are looking for 114,000 new jobs and an unemployment rate of 4.3%.

A hotter-than-expected payrolls print would likely cement dollar strength and push rate-hike pricing higher, extending gold’s quarterly rout into Q3.

In the near term, gold faces a difficult setup: structurally supported by central bank buyers who are moving slowly, but cyclically exposed to every hawkish data point that crosses the tape.