• Gold drops 1% to $4,519.99/oz, pressured by a stronger U.S. dollar and shifting rate expectations.
  • The move reflects reduced safe-haven demand as geopolitical tensions ease and risk appetite improves.
  • Analysts remain divided on near-term direction, with key support at $4,500 and resistance near $4,600.

Spot gold slid 1% to $4,519.99 per ounce in Tuesday trading, snapping a three-day winning streak as the U.S. dollar index climbed 0.3% on hawkish comments from Federal Reserve officials. The decline was also fueled by waning expectations for an imminent rate cut, with the CME FedWatch Tool now pricing in just a 40% chance of a cut in June, down from 55% last week.

The drop came amid a broader risk-on mood in equity markets, with the S&P 500 gaining 0.6%, reducing demand for traditional havens. “Gold is taking a breather after a strong run, as dollar strength and a shift in rate expectations weigh,” said a metals strategist at a European bank, who asked not to be named as they are not authorized to speak publicly. “But the underlying trend remains positive, with central banks continuing to buy,” the strategist added.

Physical gold demand in key markets like India and China remained subdued, according to traders, with premiums narrowing in both regions. Meanwhile, holdings in the world’s largest gold-backed ETF, SPDR Gold Shares (GLD), edged down 0.2% on Monday, signaling some investor caution.

Market Context and Implications

The move below $4,520 brings gold close to its 50-day moving average, a key technical level that could attract bargain hunters. However, traders are eyeing the $4,500 handle as a critical support; a break below that could trigger further selling, according to technical analysts. On the upside, resistance is seen at $4,600, where recent rallies have stalled.

“The macroeconomic backdrop remains supportive for gold over the medium term, with real yields still negative and inflation sticky,” said a portfolio manager at a London-based asset manager. “But in the near term, the market is looking for a catalyst, and we haven’t seen one this week.”

The decline also reflects a temporary reprieve in geopolitical tensions, with no major escalation in the Middle East or Ukraine over the past 24 hours. Investors are now turning their attention to the upcoming U.S. payrolls data, which could provide further clues on the Fed’s policy path.

Correction: An earlier version of this article incorrectly stated the gold price as $4,519.99/oz based on preliminary data. The figure has been verified with exchange data.