Global gold prices continued to decline on Tuesday, March 24, officially entering a “bear market” territory. Since reaching a historic high of $5,594.82 per ounce at the end of January this year, the spot gold price has dropped by over 22%.
Market analysis indicates that the strengthening of the U.S. dollar and the rise in U.S. Treasury yields have weakened the attractiveness of gold as a safe-haven asset.
According to the latest market data, spot gold fell by 2% on Tuesday before narrowing to a 1% decrease, with trading prices around $4,335.97 per ounce.
Silver also faced selling pressure, with spot silver prices dropping by over 3% to $66.93 per ounce. Looking back at last week’s performance, gold saw a nearly 10% weekly decline, marking its worst weekly drop since September 2011.
Market observers attribute this wave of decline to macroeconomic conditions and portfolio adjustments.
Since the outbreak of the Iran conflict, the U.S. dollar has appreciated by about 3%, making gold priced in dollars more expensive for foreign investors.
On Tuesday, the 10-year U.S. Treasury yield rose by approximately 5 basis points to 4.384%. Given that gold is a non-yielding asset, a high yield environment further suppressed the performance of gold prices.
Rajat Bhattacharya, a senior investment specialist at Standard Chartered Bank, noted that although gold prices initially rose due to safe-haven demand during the Iran conflict, prices have since retreated.
“We see this pattern repeating in times of increased market pressure, where investors sell gold to raise cash to meet margin calls or simply take profit when it’s lucrative,” Bhattacharya told CNBC.
In addition to short-term funding pressures, the market is also reassessing U.S. monetary policy. With inflation showing stubbornness, the market anticipates a decreased likelihood of significant rate cuts by the Federal Reserve (Fed), keeping bond yields at elevated levels.
Some analysts believe that following last year’s over 64% surge in gold prices, the current decline is a “natural correction.” eToro market analyst Zavier Wong analyzed that the historic rally in gold was largely driven by fiscal deficits, geopolitical fragmentation, and central banks reducing reliance on the U.S. dollar reserve.
Wong told CNBC, “After such a surge, some profit-taking is inevitable. Gold has been one of the best-performing assets over the past year, and during significant market fluctuations, leveraged funds and institutional investors often choose to reduce risk exposure.”