Gold prices fell nearly 2% on Tuesday, dropping below $4,900 per ounce and extending losses into a second straight session, as thin trading volumes and shifting monetary expectations weighed on the market.
Trading activity remained subdued, with markets in China and several Asian countries closed for the Lunar New Year, following a public holiday in the United States on Monday. The lighter participation amplified price movements in what traders described as a technically driven pullback.
Despite the decline, the broader macroeconomic backdrop remains supportive for bullion. Softer-than-expected US inflation data released last Friday reinforced expectations that the Federal Reserve could begin easing monetary policy later this year. Markets are now pricing in slightly more than two interest rate cuts in 2026, with July emerging as a potential starting point.
Investors are awaiting further clarity from upcoming US economic releases, including the Federal Reserve’s meeting minutes, the advance estimate of first-quarter GDP, and the Personal Consumption Expenditures (PCE) inflation report, the Fed’s preferred gauge of price pressures.
Lower interest rates typically support gold by reducing the opportunity cost of holding non-yielding assets. However, in the short term, positioning adjustments and holiday-thinned liquidity have introduced volatility.
Geopolitical developments are also in sharp focus. US-Iran nuclear talks are set to resume amid elevated tensions, while negotiations between Russia and Ukraine are scheduled to begin against the backdrop of continued fighting. Such uncertainties traditionally lend support to safe-haven assets like gold, though markets appear to be balancing those risks against monetary policy expectations.
For now, traders say gold’s next decisive move will likely hinge on the tone of the Fed’s communication and the strength of incoming economic data, factors that will shape expectations for the timing and pace of rate cuts in the months ahead.
