Gold retreats on strong U.S. dollar, delayed rate-cut expectations

A collection of gold coins is displayed at a shop in the St. Vincent Jewelry Center in the Jewelry District of Los Angeles, April 30, 2025. (AP Photo/Jae C. Hong, file)

Gold prices drifted lower on Tuesday, weighed down by a stronger U.S. dollar and fading prospects of an interest rate cut as inflation concerns intensified against the backdrop of a potentially prolonged Middle East conflict.

Spot gold was down 5.6 per cent at US$5,029.59 an ounce by 1450 GMT. Prices hit an over four-week high in the previous session.

U.S. gold futures lost 5.1 per cent to $5,041.50.

“The move lower in gold appears to be driven by a flight to liquidity - a flight to cash. We have a strong dollar and bond yields trading higher,” said Bob Haberkorn, senior market strategist at RJO Futures.

The U.S. dollar, a competing safe-haven asset, rose to an over one-month peak, making dollar‑priced bullion less affordable for holders of other currencies. U.S. Treasury yields rose for a second consecutive session.

“However, this dip in prices is likely to be short‑lived, and flight to safety flows driven by geopolitical risk should support higher gold and silver prices,” Haberkorn added.

On the geopolitical front, the Iran conflict entered its fourth day as explosions rocked Tehran and Beirut, while a senior Iranian Revolutionary Guards official said on Monday the Strait of Hormuz had been closed. Crude oil benchmarks jumped over eight per cent on Tuesday in response.

Damage to energy infrastructure and stalled tanker traffic through Hormuz have lifted the risk of sustained strength in oil, gas and refined products, stoking inflation fears and pushing back rate‑cut expectations, leaving gold with little support, said Fawad Razaqzada, market analyst at City Index and FOREX.com.

Despite being considered a hedge against inflation and turmoil, gold is typically preferred in a low‑rate environment, as it yields no interest.

Spot gold has gained 17 per cent so far this year, supported by global uncertainties, following a stellar 64 per cent rise in 2025. Meanwhile, silver is up nearly 12%.

Spot silver fell 11.2 per cent to $79.42 an ounce after climbing to a more than four-week high on Monday.

Elsewhere, platinum lost 12.6 per cent to $2,013.65 and palladium shed eight per cent at $1,624.50.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Krishna Chandra Eluri)