Gold Prices Fall: Bear Market Deepens as Dollar, Yields Rise

Gold prices retreated further from recent highs on Tuesday, remaining firmly entrenched in a bear market despite a late-day rebound, as a strengthening U.S. Dollar and sustained elevated Treasury yields continued to weigh on investor sentiment. Spot gold was trading down 1% at $4,370.29 per ounce as of late Tuesday trading, while April gold futures fell 0.8% to $4,371.50 per ounce.

The dollar index, a measure of the greenback’s strength against a basket of major currencies, rose 0.4% on Tuesday, further dampening the appeal of gold for international investors. A stronger dollar makes gold more expensive for those holding other currencies. The recent decline marks a significant shift for the precious metal, which had reached a record high of $5,594.82 per ounce at the end of January.

Gold has now lost 21% of its value since late January, with nearly 10% of that decline occurring in the past week alone – its worst weekly performance since September 2011, according to market analysts.

“Though gold initially gained due to safe haven demand at the start of the [Iran] conflict, prices have recently pulled back,” said Rajat Bhattacharya, senior investment strategist at Standard Chartered, in a statement to CNBC. “We see this pattern often repeated during periods of heightened market stress as investors raise cash to pay margin calls or simply book profits where they can,” he added, noting the dollar’s recent strength as an additional headwind for gold demand.

The yield on 10-year U.S. Treasury notes rose by approximately 5 basis points to 4.384% on Tuesday, adding to the pressure on gold. Higher Treasury yields reduce the attractiveness of non-yielding assets like gold, as investors can earn a return from bonds instead.

Some analysts characterize the current sell-off as a natural correction following a substantial rally driven by geopolitical uncertainty and structural demand. Gold prices surged by over 64% in the past year.

“Gold’s recent rally to record highs was driven less by inflation than by a broader loss of confidence: fiscal deficits, geopolitical fragmentation, and central banks quietly diversifying away from dollar reserves,” said Zavier Wong, market analyst at eToro. “After a run like that, some position unwinding was inevitable. Gold has been one of the better-performing assets over the past year, and when markets obtain choppy, leveraged funds and institutional investors tend to reduce exposure.”

Despite the current bearish sentiment, industry observers generally maintain a positive long-term outlook for gold, citing ongoing geopolitical risks, fiscal concerns, and continued demand from central banks as key supporting factors. The structural drivers underpinning gold’s longer-term bull case remain intact, according to several analysts.