Gold prices retreated more than 2% on Tuesday, marking a sharp reversal for the precious metal as market sentiment shifted decisively against safe-haven assets.
The decline was driven by a strengthening US dollar, which gained ground on growing expectations that the Federal Reserve may raise interest rates later this year.
Investors are increasingly pricing in a tighter monetary policy stance, reducing the appeal of non-yielding assets like gold.
The sell-off in gold coincided with broader risk-off dynamics, as stocks across global markets also faced pressure.
While geopolitical developments, including ongoing US-Iran peace talks, typically support demand for safe havens, the macroeconomic narrative of higher-for-longer rates is currently dominating market positioning.
The firmer dollar acts as a direct headwind for gold, making it more expensive for holders of other currencies and reducing its relative attractiveness compared to yield-bearing instruments.