• Spot gold tumbled more than 1% to $4,362.79 per ounce, snapping a brief rebound.
  • A firmer dollar and rising Treasury yields undercut bullion's appeal as a hedge.
  • Traders now eye upcoming US inflation data for clues on the Fed's next move.

Gold's Retreat Deepens

Gold prices sank over 1% in early trading, slipping to $4,362.79 per ounce, as a resurgent dollar and climbing bond yields sapped momentum from the precious metal. The pullback marks a stark reversal from last week's gains, when haven bids on Middle East tensions briefly propelled bullion toward record highs.

"The macro winds have shifted back against gold," said a London-based precious metals trader, speaking on condition of anonymity. "The dollar index is pushing higher, and real yields are creeping up again—that's a toxic combo for a non-yielding asset."

The greenback strengthened against major peers after hawkish comments from Federal Reserve officials dampened hopes for imminent rate cuts. Meanwhile, the 10-year Treasury yield hovered near recent highs, further dimming gold's luster.

Fed Expectations and Inflation Data in Focus

Market participants are now recalibrating bets on the Fed's policy path. CME FedWatch shows odds of a June cut slipping below 50%, down from nearly 70% a month ago. This shift comes ahead of Thursday's consumer price index report, which could cement or complicate the central bank's trajectory.

"Inflation has been sticky, and the Fed has made clear it needs more confidence before easing," noted a strategist at a European bank. "If CPI comes in hot, gold could face another leg down. If it's cool, we could see a quick rebound."

The metal's slide was broad-based, with silver and platinum also losing ground. Mining equities, often leveraged plays on bullion, fell in sympathy.

Safe-Haven Demand Fades

Geopolitical tensions that had fueled gold's recent rally appear to be easing, at least for now. Reports of progress in Middle East ceasefire talks reduced urgency for defensive allocations, prompting some investors to lock in profits.

"The market is fickle—one week it's all about war risk, the next it's back to macro fundamentals," said a portfolio manager at a Swiss wealth firm. "Right now, the dollar and yields are in the driver's seat."

Despite the pullback, some analysts argue gold's longer-term uptrend remains intact. Central bank buying and robust physical demand from Asia continue to provide a floor. Still, near-term momentum has clearly turned negative.

What's Next for Gold?

Investors will closely parse Wednesday's producer price data and Thursday's CPI for directional cues. A hotter-than-expected print could accelerate selling, while soft data might trigger a short-covering rally.

Technically, gold's 50-day moving average sits just below current levels, offering potential support around $4,330. A decisive break below that could open the door to further losses.

As one trader put it: "We're at a pivot point. The next two days will likely set the tone for the rest of the month."

Correction: An earlier version of this article misstated the time of the CPI release. It is scheduled for Thursday, not Wednesday as initially indicated.