Gold bars weighing 1,000 grams each are on display at the Austrian Gold and Silver Refinery (Oegussa) in Vienna, Austria, February 3, 2026.
Georg Hochmuth | AFP | Getty Images
Gold extended its decline on Tuesday, deepening its bear market phase, as investors unwind their positions, with a stronger US dollar and high Treasury yields reducing the yellow metal’s appeal.
Spot gold prices fell 2% before paring losses to 1% at $4,335.97 an ounce. Gold Futures for April delivery, losses were also reduced and fell more than 1% to $4,358.80 per ounce. Spotted silver was down more than 3% at $66.93 an ounce, while futures were down 2.61% at $67.54.
The dollar index, which measures the strength of the greenback against a basket of currencies, was up 0.5% on Tuesday. A stronger dollar reduces the attractiveness of bullion valued in green dollars by making it more expensive for holders of other currencies.
US President Donald Trump said Monday he had ordered a five-day pause in planned strikes against Iran’s energy infrastructure following discussions he called “productive” with Iranian officials. He later told CNBC’s Joe Kernen that “we are very committed to making a deal with Iran,” signaling that the war could end soon.
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Gold price since the beginning of the year
However, Iranian state media denied the claim, citing a senior security official who said no direct or indirect negotiations had taken place between Washington and Tehran.
Spot gold has now lost more than 22% since hitting a record high of $5,594.82 an ounce in late January, with the precious metal lose almost 10% last week, its worst performance since September 2011.
Market observers attributed the decline to a combination of macroeconomic and positioning factors.
“Although gold initially gained due to safe-haven demand at the start of the conflict, prices have retreated recently,” said Rajat Bhattacharya, senior investment specialist at Standard Chartered.
“We see this pattern repeating itself during periods of increased market stress, as investors raise cash to pay margin calls or simply book profits where they can,” he told CNBC via email, adding that recent dollar strength has also weighed on demand for gold.
The dollar index has strengthened by about 3% since the start of the war.
Market participants also reassessed their expectations for U.S. monetary policy, with persistent inflation reducing the likelihood of aggressive rate cuts from the Federal Reserve, keeping Treasury yields high.
Higher yields undermine the appeal of non-interest-bearing bullion. The yield on the 10-year Treasury note was about 5 basis points higher at 4.384% on Tuesday.
Some analysts noted that the selloff was a natural correction after a prolonged rally fueled by geopolitical uncertainty and structural demand. Gold is up more than 64% in the last year.
“Gold’s recent rally to record highs has been driven less by inflation than by a broader loss of confidence: budget deficits, geopolitical fragmentation and central banks quietly diversifying away from dollar reserves,” said Zavier Wong, market analyst at eToro.
“After such a trend, some unwinding of positions was inevitable. Gold has been one of the best performing assets over the past year, and when markets become unstable, leveraged funds and institutional investors tend to reduce their exposure.”