• Gold (GOLD) is on track for a 13% quarterly decline, its steepest since 2013.
  • A stronger dollar and expectations of multiple Federal Reserve rate hikes are driving the selloff.
  • Investors are favoring cash and Treasuries over gold as a safe haven.

Gold’s Glitter Fades

Gold is poised to record its worst quarterly performance in over a decade, with prices sliding roughly 13% since the start of the quarter. The selloff has intensified in recent weeks as markets price in a more aggressive tightening path by the Federal Reserve, with futures implying several rate hikes this year.

“The macro environment has turned decisively against gold,” said a senior metals analyst at a European bank. “A hawkish Fed, a surging dollar, and falling energy costs have eroded the case for bullion as an inflation hedge.”

The yellow metal has been under pressure since late last year, when the Fed signaled it would keep rates higher for longer. The dollar index has climbed to multi-year highs, making gold more expensive for overseas buyers. At the same time, real yields on U.S. Treasuries have climbed, increasing the opportunity cost of holding non-yielding assets.

Investor Exodus

Exchange-traded funds backed by gold (GLD) have seen sustained outflows this quarter, according to data from the World Gold Council. Hedge funds have also trimmed bullish bets, with net long positions on Comex falling to a near-term low.

“Gold is losing its appeal as a portfolio diversifier in a world where interest rates are rising and the dollar is king,” said a portfolio manager at a London-based asset manager. “Investors are rotating into cash and short-dated bonds, which now offer a meaningful yield.”

Looking Ahead

The outlook for gold hinges on the Fed’s next moves. If the central bank delivers another rate hike at its upcoming meeting and maintains a hawkish tone, gold could test the $1,800 an ounce level. However, any sign that inflation is cooling or that the Fed is nearing a pause could spark a relief rally.

“A lot of bad news is already priced in,” said the analyst. “But the risk is that the dollar stays strong and gold remains under pressure for the rest of the year.”

Attempts to reach representatives of the World Gold Council for comment were unsuccessful.