Soaring Dollar Sinks Gold Below $4,000, Disrupting Precious Metal's Momentum

Gold prices dropped below $4,000 per ounce again on Tuesday as the dollar held near three-month highs and expectations for another US interest rate cut in December faded. Easing trade tensions between the US and China also weakened demand for the safe-haven metal.

Gold fell 0.2% to $3,992.23 per ounce in spot trading by 0343 GMT, while US December futures contracts dropped 0.3% to $4,001.40 per ounce. The decline comes as traders pulled back on bets for further rate cuts after divisions emerged within the Federal Reserve.

The dollar stayed strong and hovered near its highest level in three months. When the dollar strengthens, gold becomes more expensive for holders of other currencies, which typically reduces demand. Higher interest rates also make non-yielding assets like gold less attractive compared to bonds and savings accounts that pay interest.

**Market context shows gold's remarkable year**

Despite Tuesday's decline, gold has surged 53% since the start of the year, driven by concerns about inflation, geopolitical tensions, and central bank purchases. But the metal has now fallen more than 8% from its record high reached on October 20.

The recent pullback reflects changing market dynamics. Trade tensions between Washington and Beijing appear to be cooling, reducing demand for gold as a safe haven. At the same time, the Fed's mixed signals on future rate cuts have strengthened the dollar and made yield-bearing investments more appealing.

**Other precious metals show mixed performance**

Silver bucked the trend with a slight 0.1% gain to $48.12 per ounce. Platinum also edged up 0.1% to $1,566.60. But palladium fell 1% to $1,430.31, reflecting weaker demand from the automotive industry where it's used in catalytic converters.

For investors, gold's current retreat doesn't erase its strong year-to-date performance. The metal continues to serve as a hedge against economic uncertainty, even as short-term factors like currency movements and interest rate expectations drive daily price swings.