After climbing to US$1,206 per ounce in June, gold has suffered seven weeks of losses, the longest fall since 1999. After mid-July, gold prices plunged under US$1,090 as sellers in China appeared to offload the precious metal. That's also when China's announced gold reserves — though showing remarkable growth — proved significantly lower than market expectations.

As the Greek debt crisis seemed to stabilize, a calm returned to China's A-share market and Fed Chair Janet Yellen delivered a seemingly upbeat assessment of the US economy, the glitter of gold no longer appeared attractive. Yellen's preference for “sooner-but-slower” rate hikes indicated that the Fed was moving toward normalization.

As US non-farm payrolls climbed 215,000 last month and unemployment rate stayed at a 7-year low of 5.3 percent, gold rose close to US$1,100. That, however, was predicated on the assumption that the Fed would defer the interest rate hike beyond September. In the past two weeks, prices have been between US$1,080 and US$1,100. However, the impending rate hike is likely to strengthen the prospects of the dollar, which would put gold under further pressure.

Most observers have explained gold's plunge with a set of drivers. The problem is, at closer inspection, each proves elusive.

First of all, the continued recovery of the US economy is strengthening the dollar and expectations of an impending rate hike, which is seen as paving the way for gold's further decline. Yet, even as the US dollar index rose by over 12 percent in 2014, the dollar-denominated gold price was flat.

In fall 2014 and spring 2015, gold was driven by the broad commodity sell-off, especially the drastic plunge of oil prices which was fueled by the stronger dollar, along with concerns over China's slowdown. Yet, the reality is that gold has low correlations with commodities and other asset classes.

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