• Spot gold tumbled nearly 2% to $4,385.43 per ounce, its biggest single-day decline in over a month.
  • The sell-off was fueled by a strengthening US dollar and rising real yields, as markets reassess rate-cut expectations.
  • Analysts point to a risk-on shift in sentiment, with equities rallying and safe-haven demand fading.

Gold Takes a Hit as Dollar and Yields Surge

Spot gold suffered a heavy blow on Thursday, sliding almost 2% to $4,385.43 an ounce, according to people familiar with the market. The decline, which accelerated in afternoon trading, erased gains from earlier in the week and pushed the metal back toward key support levels.

“The move was driven by a combination of a stronger dollar and a sharp rise in real yields,” said a London-based precious metals trader. “We saw some stop-loss selling kick in below $4,400, which exacerbated the drop.”

The US dollar index jumped 0.6% against a basket of major currencies, while the yield on the 10-year Treasury note climbed to 4.35%, with real yields—adjusted for inflation—hitting their highest level in two weeks. Higher yields increase the opportunity cost of holding non-yielding assets like gold.

Rate-Cut Expectations Shift

The sell-off comes as traders dial back bets on aggressive Federal Reserve rate cuts following stronger-than-expected economic data. Recent remarks from Fed officials have also tempered dovish expectations, with some policymakers signaling patience on easing.

“Gold had been rallying on hopes of early rate cuts, but that narrative is now being challenged,” noted a strategist at a major bank. “If the data continues to show resilience, we could see further downside.”

Market pricing now implies a roughly 60% chance of a quarter-point cut at the Fed’s September meeting, down from 75% a week ago, according to CME FedWatch data.

Risk Appetite Returns

Equities rallied on Thursday, with the S&P 500 gaining 1.2%, as investors embraced riskier assets. The shift away from safe havens weighed on gold, which often moves inversely to stocks during risk-on periods.

“The macro backdrop is all about growth optimism today,” said an analyst at a hedge fund. “Gold is just not the place to be when everyone is piling into equities.”

Technical Breakdown

From a technical perspective, gold’s break below the $4,400 support level—a area that had held since early June—signals further weakness. The next key support lies near $4,350, the 50-day moving average.

“We’re watching $4,350 very closely,” the trader added. “If that fails, we could see a test of $4,300 or lower.”

What’s Next?

Investors will now focus on upcoming US inflation data and Fed speakers for clues on the policy path. A hotter-than-expected CPI print could deepen gold’s losses, while a soft reading might spark a rebound.

We reached out to the World Gold Council for comment but did not receive an immediate response.

Correction: An earlier version of this article misstated the percentage decline. The fall was nearly 2%, not 1.8%.