Gold prices drop for fourth day as dollar gains strength
3 Min Read
Despite the recent decline, many experts remain optimistic about gold's future.
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A big Paris-themed gold commemorative coin is shown during the "Trial of the Pyx,'' a ceremony that dates to the 12th Century in which coins are weighed in order to make certain they are up to standard, at the Goldsmiths' Hall in London, Tuesday, February 11, 2025. (AP Photo/Frank Augstein)
Gold prices continued their decline on Tuesday, marking the fourth consecutive day of losses, as the US dollar strengthened and expectations faded for an interest rate cut by the Federal Reserve next month.
Spot gold fell 0.8% to $4,011.85 per ounce, while US gold futures dropped 1.6% to $4,010.90 per ounce.
"The dollar was a bit stronger today, and also some of the speculative length has been reduced this past week. The gold market is going to consolidate for now," Marex analyst Edward Meir told Reuters.
Gold has dropped approximately 8% since hitting a record high of $4,381 per ounce in October, a decline of over $300. The three factors driving this pullback are a stronger dollar, lower expectations of a Fed rate cut, and profit-taking motives.
Why gold is falling
A stronger dollar: When the dollar rises in value, gold becomes more expensive for buyers using other currencies, reducing demand. The US Dollar Index has recently reached its highest levels since mid-2024.
Reduced rate cut expectations: The chances of the Federal Reserve cutting interest rates in December have plummeted from nearly 100% to just 42%. Fed Vice Chair Philip Jefferson said on Monday the central bank needed to "proceed slowly" with further rate cuts, as reported by Reuters. This matters because gold typically becomes more attractive when interest rates are low, as it competes less with interest-bearing investments.
Profit-taking: Market analysts characterize the recent decline as primarily technical rather than fundamental. According to UBS analysts, "Outside technical factors, we see no fundamental reason for the sell-off." Gold had surged 47-54% year-to-date through October 2025, prompting natural profit-taking by investors following such an extraordinary rally.
What happens next?
Market participants are closely watching this week's US economic data, particularly Thursday's employment report, which could influence the Federal Reserve's decision on interest rates.
"Expectations the Fed will cut again next month dropped to 42% overnight from a high of almost 100% soon after the September decision. This has weighed on investor appetite for gold," ANZ said in a note.
Technical analysts see strong support around the $4,000 level, suggesting gold may not fall much further from current prices.
Long-term outlook remains positive
Despite the recent decline, many experts remain optimistic about gold's future. "Nonetheless, structural tailwinds, such as geopolitical uncertainty, concerns about US debt sustainability, de-dollarization trends and central bank buying, are expected to support investment demand in the medium- and long-term," ANZ noted.
Major banks maintain bullish forecasts for 2026, with Goldman Sachs projecting gold could reach $4,900 per ounce by December 2026, while Bank of America forecasts $5,000 per ounce.
Central banks worldwide continue to buy large quantities of gold as they diversify away from holding only US dollars, providing steady long-term demand for the precious metal.
Other precious metals
Other precious metals also declined on Tuesday. Silver fell 1.1% to $49.63 per ounce, platinum slipped 1.3% to $1,514.35, and palladium dropped 1.2% to $1,369.78.
The Federal Reserve's December 10 meeting will be crucial in determining whether gold continues to fall or begins recovering toward its previous highs.
