Gold and Bitcoin Fall Amid Strong Dollar, While U.S. Stocks Surge on AI Optimism

Gold Suffers Worst Quarterly Performance in 13 Years
Bitcoin Also Drops 20% in the Second Quarter


U.S. Stocks Post Biggest Gains Since the Pandemic
Fueled by AI Optimism in Q2
Rally Expected to Slow in the Second Half of the Year

With the likelihood of a U.S. benchmark interest rate hike increasing in the second half of this year, asset markets are experiencing mixed fortunes. Gold prices recorded their worst quarterly performance in 13 years, while the U.S. stock market posted its highest rate of increase since the COVID-19 pandemic.

On June 30 (local time) at the New York Mercantile Exchange (COMEX), August gold futures settled at $4,038.50 per ounce. According to the Wall Street Journal (WSJ), the second quarter decline was about 13.4%, marking the largest drop since the second quarter of 2013. During the same period, silver, another leading precious metal alongside gold, also fell by 22%, recording its weakest quarter since 2023.

At the end of January this year, gold prices had soared to an all-time high of $5,318 per ounce. Subsequently, concerns over inflation originating from the Middle East fueled expectations of an interest rate hike by the U.S. Federal Reserve (Fed). As the dollar strengthened, gold prices plunged by about 25% from their peak. The increase in the dollar's value raised the cost of purchasing gold, and, at the same time, the appeal of gold as an investment diminished since it does not pay interest.

This stands in stark contrast to the U.S. stock market, which saw a strong rally in the second quarter, driven by optimism around artificial intelligence (AI). The S&P 500 Index and Nasdaq Index rose by 15% and 21%, respectively, posting their highest quarterly gains since the second quarter of 2020. The Dow Jones Index also climbed 9% in the first half of the year, marking its best half-year performance since 2021. Oliver Percy, Senior Vice President at Wellsfire Advisors, stated, "Despite various geopolitical uncertainties, the U.S. economy and corporate earnings remain solid."

This explosive rally is considered an unusual trend even among risk asset markets. According to Cointelegraph, a digital asset media outlet, the price of Bitcoin fell by about 20% in the second quarter. According to the cryptocurrency market tracking site CoinMarketCap, Bitcoin was trading at $58,354 as of the morning of the 1st, down 2.4% from 24 hours earlier.

Some analysts attribute the volatility in currency markets—such as the Japanese yen dropping to its lowest level in 40 years due to the strong dollar—to governments selling off other assets in order to defend their currencies. Market analyst George Gammon commented on the social networking service X (formerly Twitter), "There is a lot of dollar-denominated debt, but a shortage of dollars. To secure dollars, assets are being sold off, which is putting downward pressure on the yen, rupee, won, bitcoin, and other currencies and assets."

It is also expected that the rally in the U.S. stock market will lose momentum in the second half of this year. WSJ cited the possibility of a U.S. benchmark rate hike and high market valuations as reasons for this forecast. According to FedWatch, the federal funds futures market on this day reflected a higher probability of the Fed raising rates by 25 basis points (1bp = 0.01 percentage point) each in September, October, and December, rather than keeping them on hold. Bank of America (BoA) even projected that there could be up to three rate hikes within the year.

This content was produced with the assistance of AI translation services.