Gold Prices Drop Amid Strong Dollar and Rising Treasury Yields
A gold bar weighing 1000 grams was showcased at the Austrian Gold and Silver Refinery in Vienna on February 3, 2026.
On Tuesday, gold prices fell further, deepening the bear market as investors moved away from buying. The strength of the U.S. dollar and increasing Treasury yields caused gold to lose its appeal. Spot gold prices dropped by 2% to $4,335.97 per ounce and futures for April delivery fell over 1% to $4,358.80. Spot silver also saw a decline, dropping more than 3% to $66.93 an ounce, while silver futures fell by 2.61% to $67.54.
The dollar index, which gauges the dollar’s strength against other currencies, rose by 0.5% on Tuesday. A stronger dollar generally makes gold, priced in dollars, more expensive for those using other currencies.
Currently, spot gold is down over 22% from a peak of $5,594.82 an ounce reached in late January. Last week alone, gold prices experienced a nearly 10% decline, marking the steepest drop since September 2011. Interestingly, the dollar index has risen about 3% since the onset of the conflict.
Analysts suggest that the decline in gold prices results from a mixture of macroeconomic conditions and positioning strategies.
Rajat Bhattacharya, a senior investment specialist at Standard Chartered, noted that gold initially experienced an uptick in demand as a safe-haven asset, but has seen recent declines tied to the ongoing conflict. He remarked, “We’ve seen this pattern during periods of high market stress as investors seek to raise cash for margin calls or secure profits when possible.” He also pointed out that the dollar’s recent strength is affecting gold demand negatively.
Looking ahead, market participants are reassessing their expectations regarding U.S. monetary policy. Persistent inflation is making aggressive rate cuts by the Federal Reserve seem unlikely, which keeps Treasury yields elevated. For instance, the yield on the 10-year U.S. Treasury rose roughly 5 basis points to 4.384% on Tuesday. Higher yields typically make gold, which does not offer interest, less appealing.
Some analysts view the current decline as a natural adjustment after a lengthy rally, which had been propelled by geopolitical uncertainties and consistent demand. Last year, gold prices surged by more than 64%.
Xavier Wong, a market analyst at eToro, commented that the previous highs in gold prices were driven more by diminishing confidence, fiscal deficits, geopolitical tensions, and central banks diversifying away from reliance on the dollar. He suggested that after such a significant rally, some level of position unwinding was almost bound to happen. Given gold’s strong performance over the past year, when volatility hits the markets, both leveraged funds and institutional investors often reduce their holdings.
