By News Desk 
Gold prices slipped below the crucial $3,400 mark on Tuesday, continuing to decline into Wednesday morning as well. At the time of reporting, gold is trading around $3,380, down by nearly 0.5%. Experts have pointed to a mix of macroeconomic and geopolitical factors that are dragging gold prices down, despite conditions that would typically support a rally. In India, domestic prices are also following this global downtrend.
Let’s break down the key reasons behind the fall in gold prices:
💵 Strong U.S. Dollar Undermines Gold
One of the most significant pressures on gold has come from a strengthening U.S. dollar. The U.S. Dollar Index (DXY) rose 0.46% on Tuesday to 98.58. Since gold is priced in dollars globally, a stronger dollar makes gold more expensive in other currencies—leading to lower demand.
🌍 Geopolitical Tensions Escalate, Yet Gold Fails to Shine
Tensions in the Middle East—particularly between Iran and Israel—have intensified, with former President Donald Trump abruptly leaving the G7 Summit and issuing a stern warning: “Everyone should leave Tehran immediately.”
Reports suggest Trump may support a coordinated strike with Israel on Iran, increasing geopolitical risk. Under normal circumstances, such instability would boost gold as a safe haven. However, other economic factors are currently overpowering this effect.
🏦 All Eyes on the Federal Reserve
Markets are awaiting the U.S. Federal Reserve’s next move. While no immediate interest rate changes are expected, the “dot plot” projections for 2025—which signal future rate cuts—will be closely watched.
Even a slight hawkish shift (e.g., if two Fed officials forecast fewer cuts than previously expected) could weaken gold’s appeal, as higher interest rates typically reduce gold’s attractiveness due to its non-yielding nature.
📉 Weak U.S. Economic Data Supports Rate Cut Case
Recent U.S. economic indicators have disappointed:
- Retail sales in May fell 0.9%, against an expected 0.7% drop.
- Industrial production slipped 0.2%, marking two declines in the past three months.
These weak figures bolster expectations of a future rate cut, which is generally bullish for gold.
🏦 Central Banks Increasing Gold Reserves
A World Gold Council survey found that 95% of 73 central banks plan to increase their gold reserves over the next year. This continued interest reflects growing confidence in gold’s long-term value, especially as bond yields fall.
📉 U.S. Bond Yields Drop – A Tailwind for Gold
The 10-year U.S. Treasury yield has dropped 5.5 basis points to 4.403%, while real yields declined to 2.103%—a positive signal for gold, which often rises as real yields fall.
📊 Technical Outlook: Key Levels to Watch
Despite current weakness, gold’s overall trend remains upward on the charts.
- Resistance Levels:
- $3,400
- $3,450
- $3,500 (all-time high)
- Support Levels:
- $3,350
- $3,293 (50-day SMA)
- $3,167 (April 3 high)
📈 Investor Strategy: Buy the Dip or Wait?
If the Fed adopts a dovish tone, gold could easily reclaim the $3,400+ level. However, if the dollar continues to strengthen, more selling pressure may be ahead.
For now, “buying the dip” near strong support levels could be a viable strategy—but investors should proceed cautiously and consider market volatility.