In the just-concluded second quarter, the U.S. stock market and gold market showed a clear divergence. U.S. stocks rose sharply, supported by AI-driven trading and corporate earnings, while gold faced pressure from shifting Federal Reserve policy expectations, a stronger dollar, and capital outflows, recording one of its worst quarterly performances in over a decade.
U.S. stocks were led higher by chip stocks.
In the second quarter, the S&P 500 rose 15% and the Nasdaq Composite increased 21%, both posting their best quarterly performance since 2020; the Dow Jones Industrial Average gained 13%, marking its strongest quarter since 2022.
The core driver of market momentum comes from AI-related sectors. Micron Technology rose 242% in a single quarter, AMD increased by 186%, Broadcom by 22%, and NVIDIA by 15%. The Philadelphia Semiconductor Index climbed a total of 88%, marking its best quarterly performance in history.
Corporate profits also support the stock market. According to FactSet data, approximately 85% of S&P 500 companies reported first-quarter earnings above expectations, the highest percentage since 2021. Analysts expect these companies’ second-quarter profits to rise 22% year-over-year, with full-year growth potentially reaching 23%.
Gold falls below $4,000
In contrast to the stock market, gold fell approximately 14% in the second quarter, dropping as low as $3,942.99 per ounce—the largest quarterly decline since 2013. Silver declined even more, falling 20% during the same period.
The market generally attributes the decline in gold to changing expectations regarding Federal Reserve policy. Reports indicate that newly appointed Fed Chair Walsh signaled a more hawkish stance than expected during his first public appearance, prompting the market to adjust its assessment of the interest rate path. As a non-yielding asset, gold faces increased pressure in a high-interest-rate environment.
In addition to interest rate factors, a stronger U.S. dollar, outflows from gold ETFs, and some capital shifting toward AI and semiconductor stocks have further pressured gold prices. Data from the World Gold Council shows that gold ETFs may experience net outflows for a second consecutive month in June.
Volatility may remain high in the second half of the year.
Although the U.S. stock market delivered a strong performance in the second quarter, the outlook for the second half of the year remains uncertain. High valuations, the risk of rising interest rates, whether AI investments will deliver on their promises, and the lingering effects of the Middle East situation continue to be key concerns for investors.
According to Dow Jones market data, since the beginning of the year, the S&P 500 has experienced daily price movements exceeding 1% on more than a quarter of trading days. This indicates that even as the index remains at elevated levels, intraday volatility may continue to intensify.
Some institutions still raised their target levels. Stifel strategist Thomas Carroll recently raised the S&P 500 target to 7,800, about 4% above the latest closing level. However, several market participants also believe that the market is more likely to move within a high-volatility environment in the second half of the year, rather than on a one-way upward trajectory.