Gold Falls Over 1% for Tenth Straight Session as Dollar Strengthens and Fed Rate Cut Hopes Dim
Gold prices extended their losing streak to a tenth consecutive session on Tuesday, shedding more than 1% as a strengthening US dollar and fading expectations of near-term Federal Reserve interest rate cuts continued to weigh on the precious metal. The decline marks a dramatic reversal for gold, which had initially surged as a safe haven when the Iran war began but has since lost significant ground as rate expectations and currency dynamics shifted.
Gold Price Movements
- Spot Gold: Fell 1.6% to $4,335.18 per ounce as of early GMT trading on Tuesday — its lowest level since November 24.
- US Gold Futures (April delivery): Declined 1.6% to $4,336.10 per ounce.
- Since February 28 (war start date): Spot gold has now fallen approximately 18% from its peak, with the US dollar emerging as the clearest safe-haven beneficiary of the conflict rather than gold.
Why Gold Is Falling Despite an Ongoing War
The counterintuitive sell-off in gold — traditionally considered a war-time safe haven — reflects a more nuanced market dynamic. Ilya Spivak, head of global macro at Tastylive, explained that markets are driving up interest rates on the reasoning that the Iran war will fuel inflation, and the expectation that global central banks will turn more hawkish in response has been the primary driver pushing gold lower.
While rising inflation typically boosts gold's appeal as an inflation hedge, the crucial offset is the impact of higher interest rates on a non-yielding asset like gold. When rates rise or are expected to remain elevated, the opportunity cost of holding gold increases, making yield-bearing assets more attractive by comparison. This dynamic has overwhelmed gold's safe-haven appeal in the current environment.
Fed Rate Cut Expectations Collapse Further
Adding to gold's headwinds, investor expectations for a Federal Reserve rate cut have been dramatically scaled back. According to CME Group's FedWatch tool, bets on a December Fed rate cut were trimmed to approximately 13%, down sharply from just above 25% in the prior session. The erosion of rate cut hopes reinforces the bearish case for gold in the near term.
Geopolitical Developments: Iran Denies Talks
On the geopolitical front, Iran denied reports of any negotiations with the United States, even after President Trump postponed a threatened strike on Iran's power grid, citing what he described as productive talks with unnamed Iranian officials. Oil prices held above $100 per barrel following Iran's denial, keeping energy market anxiety elevated. Separately, a Pakistani official and a second source told Reuters that direct talks to end the conflict could potentially take place in Islamabad as early as this week — a development that, if confirmed, could provide fresh relief to commodity and equity markets.
Technical Levels to Watch
For traders and investors tracking gold's near-term direction, key technical levels highlighted by Ilya Spivak are:
- Support levels: $4,275 and $4,000 per ounce.
- Resistance levels: $4,650 and $4,840 per ounce.
Other Precious Metals Also Under Pressure
The weakness extended across the broader precious metals complex on Tuesday:
- Silver: Lost 2.9% to $67.11 per ounce.
- Platinum: Declined 2.1% to $1,842.30 per ounce.
- Palladium: Shed 2.1% to $1,403.76 per ounce.
What This Means for Indian Investors
For Indian gold investors and jewellery buyers, the international price correction — if sustained — could offer some relief on domestic gold prices, though the weakening rupee (now at record lows near Rs 93.71 against the dollar) will partially or fully offset the benefit of lower global prices in rupee terms. Investors holding gold as a portfolio hedge should note that the current sell-off reflects a specific interest rate and dollar dynamic, rather than a fundamental change in gold's long-term value preservation characteristics. Any meaningful de-escalation in the Middle East or a dovish pivot from the Fed could quickly reverse the current downtrend.
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