Gold is ending its worst quarterly performance in 13 years as demand for the precious metal continues to weaken.
On June 30, gold’s price was clinging to $4,000 U.S. but in danger of falling below the key support level as the U.S. dollar continues to strengthen and interest rates look likely to rise.
In late trading on June 29, gold’s price fell to $3,975 U.S., its lowest price of the year. However, the price has since clawed its ways back above $4,000 U.S.
In early trading on June 30, gold’s price is at $4,038.10 U.S. The yellow metal has steadily eroded since hitting a record high of $5,318 U.S. at the end of January this year.
Analysts say the rally in gold has been derailed by a strong U.S. dollar that competes with metals as a store of value.
Additionally, the U.S. Federal Reserve has signalled that interest rates are likely to move higher in the year’s second half as it combats inflation.
Higher interest rates are a negative for gold, which is a non-yielding asset. Gold tends to perform best when rates are moving lower.
A pause in gold purchases among central banks around the world has also helped to cool demand for the metal.
Many central banks sold part of their gold holdings during the last quarter to help offset rising energy prices.
Gold’s price is now down 13% in the year’s second quarter, its biggest quarterly pullback since the second quarter of 2013, according to market data.
A number of analysts say that the $4,000 U.S. level represents critical support for gold and a breakdown below that level could lead to an accelerated selloff in the year’s second half.
Below $4,000 U.S., the next support level for gold is at $3,680 U.S.
