Gold prices fell sharply on Tuesday, trading around $5,060 per ounce, a roughly 5% decline from a daily high of $5,379 reached earlier in the Asian session, as a strengthening US dollar and rising Treasury yields pressured the precious metal.
The US Dollar Index (DXY) climbed above 99.00, reaching its highest level in over a month, making gold more expensive for international buyers. Simultaneously, the benchmark 10-year US Treasury yield gained nearly 17 basis points over the past two days, further weighing on gold’s appeal as a non-yielding asset. According to data from crypto.com, as of 7:16 PM today, 1 XAU is currently worth $5,100.35.
Despite the price pullback, analysts suggest downside risks are limited by ongoing geopolitical tensions. Markets are assessing the potential for a prolonged conflict in the Middle East following joint strikes by the United States and Israel on Iran over the weekend, and Tehran’s subsequent targeting of US military bases in Gulf nations. Late Monday, two drones struck the US Embassy in Riyadh, prompting a warning from US President Donald Trump regarding potential retaliation.
The rising price of oil, driven by geopolitical instability, is also fueling concerns about inflation, potentially tempering expectations for near-term interest rate cuts by the Federal Reserve. The CME FedWatch Tool indicates that markets are fully pricing in no interest rate changes at the March and April meetings. The probability of a 25-basis-point rate cut in June has decreased to 28.1%, down from 42.8% a week ago.
Comments from Federal Reserve officials on Tuesday offered further insight into the central bank’s thinking. Fresh York Fed President John Williams stated that the central bank’s policy stance is “well-positioned,” and that any future rate cuts would be aimed at preventing policy from becoming overly restrictive. He also noted that the US economy remains “on a solid footing” with a “stabilising” labor market. Kansas City Fed President Jeff Schmid emphasized that there is “no room to be complacent on inflation,” even as acknowledging continued strong economic growth supported by fiscal policy.
From a technical perspective, the near-term outlook for gold has turned bearish after failing to sustain gains above $5,400. Price action on the 4-hour chart is forming a bearish flag pattern, potentially signaling further declines. The 100-period Simple Moving Average (SMA) at $5,093 is a key immediate support level. A break below this level could accelerate selling pressure, with subsequent downside targets at $4,850 and $4,650. Conversely, a decisive move above the $5,400-$5,500 resistance zone would be needed to invalidate the bearish structure and revive the broader uptrend. Momentum indicators, including the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD), also point to growing downside pressure.
Gold is widely seen as a safe-haven asset and a hedge against inflation and depreciating currencies, as it doesn’t rely on any specific issuer or government. Central banks are the biggest holders of gold, adding 1,136 tonnes worth around $70 billion to their reserves in 2022, the highest yearly purchase since records began, according to the World Gold Council.
