Gold fell to a fresh six-month low on Thursday as investors dump the once-hot trade on growing concern that higher inflation will force the Federal Reserve into possibly raising rates later this year, or at least keep them steady.

But there are also other factors at play.

August gold futures touched $4,046.20 an ounce on Thursday, their lowest level since November. Gold is down 6.3% this week alone, putting it on pace for a second straight weekly loss and its worst week since mid-March, when gold fell 9.62%.

It was last down 0.5% to $4,111.10 an ounce.

Fed reversal

As a safe-haven asset, investors gravitate toward the yellow metal during times of market uncertainty and in hopes that it will act as a hedge against inflation. But because gold doesn’t yield anything, the metal is also especially sensitive to expectations for long-term, real interest rates.

The Iran war, now in its fourth month, has fueled inflation by pushing energy and other prices higher.

U.S. consumer inflation in May increased at its fastest pace in three years, mainly from the surging prices of energy-related products. Together with a stronger-than-expected May jobs reports, expectations have grown that the Fed may need to raise interest rates by the end of the year to slow down price increases. 

Next week, the Federal Reserve is expected to hold its benchmark lending rate steady at 3.50% to 3.75% during Kevin Warsh’s first meeting as Fed chair. A majority of ⁠economists in a Reuters poll expect interest rates to remain unchanged ⁠this year after many were penciling in multiple rate cuts to start the year.

Traders are less sanguine, and are currently pricing in a 67% chance of a Fed rate hike by December, according to the CME Group’s FedWatch tool.

Higher rates, if they help stamp out inflation, can make dollar-denominated assets such as Treasury securities more attractive. 

The technical breakdown

Based on price chart analysis, the overall technical picture for gold remains weak.

Gold recently broke below its 200-day moving average for the first time since September 2023, which Citigroup flagged as a major negative signal. The bank has been cautious near term on gold ever since the war escalated in March, partly due to higher energy costs springing from the closure of the Strait of Hormuz.

In the long term, Citi remains bullish.

“While market participants struggle with the short-term outlook, which relies heavily on the Strait of Hormuz outcome, the consensus view remains constructive over the medium to long term on robust non-cyclical demand from increasing global geopolitical fragmentation, lingering sovereign debt and debasement concerns and sustaining central bank reserve diversification trend,” Citi analysts said.

Retreat from the ‘debasement trade’

JPMorgan sees a broad-based retreat of the “debasement trade” by retail and institutional investors.

The withdrawal from that trade that started to emerge a couple of weeks ago has continued in recent weeks.

The bank cited outflows from gold exchange-traded funds and weaker futures positioning due to growing concerns around the size of the government deficit, longer-term inflation backdrop, higher geopolitical uncertainty since 2022.

“Our momentum signal framework also points to a continued retreat from the debasement trade. The pattern since the start of the Iran conflict has been similar to ETF flows and the futures positioning proxy,” the bank noted.

JPMorgan’s analysis shows gold ETF outflows of around $20 billion in the week to June 5 after modest inflows in the prior week while bitcoin ETFs recorded gradual increasing outflows over the previous four weeks.

In the futures space, investors continued to unwind exposures to the debasement trade. The bank noted that reduction to gold had started from end-February and has remained steady since mid-April

Small caps just had their first historic week in three years, and one exchange-traded fund expert predicts the group’s record highs will help drive investors back into the group.

“Small caps are going to become more in favor in 2025,” VettaFi’s Todd Rosenbluth said on CNBC’s “ETF Edge” this week. “They started to perk up since the election and heading into the election as interest rates have been coming down.”

Rosenbluth, the firm’s head of research, expects ETF funds specializing in small caps to reap the benefits of investors looking to broaden out their market exposure.

The Russell 2000, which tracks small-cap stocks, hit its first record high since November 2021 this week and just saw its best monthly performance since last December. The index is up almost 11% in November and 35% over the past 52 weeks as of Friday’s close.

Rosenbluth suggests some profit taking in the “Magnificent Seven” stocks, which include Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms and Tesla, will benefit small caps. He also expects investors to rotate out of money market accounts due to the effects of the Federal Reserve’s interest rate easing policy.

“We expect some more dispersion in the winners,” Rosenbluth said.

Rosenbluth cited the iShares Core S&P Small-Cap ETF and the VictoryShares Small Cap Free Cash Flow ETF as potential ways to play strength in small caps. The Core S&P Small-Cap ETF is up 11% in November while the VictoryShares’ fund is up almost 8%.

One financial firm is trying to capitalize on preferred stocks – which carry more risks than bonds, but aren’t as risky as common stocks.

Infrastructure Capital Advisors Founder and CEO Jay Hatfield manages the Virtus InfraCap U.S. Preferred Stock ETF (PFFA). He leads the company’s investing and business development.

“High yield bonds and preferred stocks… tend to do better than other fixed income categories when the stock market is strong, and when we’re coming out of a tightening cycle like we are now,” he told CNBC’s “ETF Edge” this week.

Hatfield’s ETF is up 10% in 2024 and almost 23% over the past year.

His ETF’s three top holdings are Regions Financial, SLM Corporation, and Energy Transfer LP as of Sept. 30, according to FactSet. All three stocks are up about 18% or more this year.

Hatfield’s team selects names that it deems are mispriced relative to their risk and yield, he said. “Most of the top holdings are in what we call asset intensive businesses,” Hatfield said.

Since its May 2018 inception, the Virtus InfraCap U.S. Preferred Stock ETF is down almost 9%.

The NFL’s most exclusive club is about to let in new members.

At a special league meeting in Eagan, Minnesota, on Tuesday, the National Football League’s 32 owners are expected to vote in favor of allowing select private equity firms to buy up to a 10% stake of a team. Each fund or consortium will be able to do deals with up to six teams.

The initial approved firms will include Ares Management, Sixth Street Partners and Arctos Partners, in addition to a consortium nicknamed “The Avengers” that includes Dynasty Equity, Blackstone, Carlyle Group and CVC Capital Partners, people familiar with the matter told CNBC.

The firms collectively have $2 trillion in assets and intend to commit $12 billion of capital to be raised (inclusive of leverage) over time, said the people, who asked not to be identified to speak about terms that were not yet public. With at least four investor groups able to invest in up to six teams each, that works out to $500 million of added capital on average for each team that receives an investment.

NFL Commissioner Roger Goodell told CNBC in July that the league has had tremendous interest from private equity.

The league created a committee last September to look at the possibility of welcoming private equity funding and has been meeting with the selected firms more recently.

The NFL is the last major sports league to allow private equity investment, and it’s still treading lightly on the issue by allowing only a select group to participate and at a lower rate than the other professional sports leagues.

The National Basketball Association, Major League Baseball, the National Hockey League and Major League Soccer all allow private equity ownership of up to 30%.

Goodell told CNBC in July that he believes the 10% is a complement to the existing ownership structure and that the percentage could be raised at some point in the future.

As NFL team valuations rise, it’s meant a smaller pool of owners have the money to foot the price tag when teams become available.

That dynamic was on display during the sale of the Washington Commanders last year. The franchise sold for a record $6.05 billion to an ownership group that included Apollo co-founder Josh Harris and 20 other investors.

Harris said in June that the process “created a little bit of a wake-up call at the NFL.”

“Unless you’re one of the wealthiest 50 people [in the world], writing a $5 billion equity check is pretty hard for anyone,” Harris told CNBC at the CNBC CEO Council Summit at the time.

As the NFL opens its doors to fresh capital, the money will also free up funding for new stadiums and related projects.

The Buffalo Bills and Tennessee Titans are both currently in the process of building new stadiums, while the Cleveland Browns, Chicago Bears and Washington Commanders are actively pursuing new stadiums in the future.

The District of Columbia Court of Appeals has paved the way for bitcoin exchange-traded funds.

On Tuesday, the court sided with Grayscale in a lawsuit against the Securities and Exchange Commission which had denied the company’s application to convert the Grayscale Bitcoin Trust to an ETF. The decision could impact other companies that want to create bitcoin ETFs, like BlackRock and Fidelity.

A spot bitcoin ETF lets investors gain exposure to the world’s biggest cryptocurrency without having to custody the actual token.

Bitcoin, ether, and other major cap crypto coins surged on the news, and Coinbase, which is listed as the custodian partner in multiple spot bitcoin ETF applications, was up more than 14% on Tuesday.

Grayscale Investments, which manages the world’s biggest crypto fund, initiated its lawsuit against the SEC in June 2022 after the agency rejected its application to turn its flagship bitcoin fund, better known by its ticker GBTC, into an ETF. The company decided to pursue the ETF, which would be backed by bitcoin rather than bitcoin derivatives, after the SEC approved ProShares’ futures-based bitcoin ETF in October 2021.

The ruling faced multiple delays but the SEC ultimately rejected the application last summer, citing failure by Grayscale to answer questions related to concerns about market manipulation and investor protections.

A spokeswoman for Grayscale called Tuesday’s ruling “a monumental step forward for American investors, the Bitcoin ecosystem, and all those who have been advocating for Bitcoin exposure through the added protections of the ETF wrapper.”

“The Grayscale team and our legal advisors are actively reviewing the details outlined in the Court’s opinion and will be pursuing next steps with the SEC. We will share more information as soon as practicable,” continued the written statement.

GBTC, which has $16 billion in assets under management as of Tuesday, was the first crypto product investors could trade in their brokerage accounts to get exposure to bitcoin. It was launched in 2013, well before the approval of bitcoin ETFs in Canada or bitcoin futures ETFs in the U.S. Grayscale charges a 2% annual fee to investors, making it a cash cow for parent company Digital Currency Group, led by Barry Silbert.

“It virtually guarantees they will approve BlackRock and Fidelity,” said Dave Weisberger, CEO of CoinRoutes, a platform that provides algorithmic trading and consolidated market data products for digital assets across multiple exchanges and liquidity providers. “Grayscale may need to refile, but they will almost certainly be approved as well.”

Firms have been applying for spot bitcoin ETFs for more than two years, but so far, the SEC has denied more than 30 proposals since 2021 — a 100% rejection rate. But investor sentiment was buoyed in June when BlackRock, the world’s largest asset manager with some $9 trillion in assets under management, put in an application. The firm has had all but one of its previous 575 ETF applications accepted. 

— CNBC’s Jordan Smith contributed to this report.