Gold prices slipped below the closely watched $4,000-per-ounce threshold on Monday, breaking a months-long winning streak that had made the precious metal one of 2025's standout investments. Spot gold fell 0.8% to $3,970.39 per ounce, while U.S. futures held just under $3,980. The decline marks the first time since October that gold has dipped below what traders consider a key psychological level.
Analysts attribute the pullback to a stronger U.S. dollar, a modest easing of global trade tensions, and mixed signals from the Federal Reserve on the path of interest rates. The Fed's recent rate cuts initially boosted gold, but Chair Jerome Powell's cautious tone has since tempered hopes for another move in December.
"The dollar's strength is definitely eating into gold's appeal right now," said Tim Waterer, Chief Market Analyst at KCM Trade. "Traders are realizing that the Fed may hold steady for longer than expected, which shifts sentiment away from safe-haven assets like gold."
Gold's recent rally had been driven by expectations of looser monetary policy, which typically makes non-yielding assets more attractive compared with bonds or cash. But that narrative appears to be fading. The CME's FedWatch Tool now places the probability of a December rate cut at 65%, down sharply from over 90% before Powell's remarks. The uncertainty has been compounded by a U.S. government shutdown that has delayed key economic data releases.
"Investors are now flying blind," said Rachel Kim, an analyst at London Bullion Partners. "With limited economic data, it's difficult to predict how the Fed will act, and that uncertainty keeps gold traders on edge."
The combination of Powell's tempered comments and missing data has prompted profit-taking after a long rally. Despite the dip, gold remains up more than 50% so far this year, underscoring the metal's resilience amid persistent global risks.
Meanwhile, developments in China are adding another layer of complexity. Beijing's decision to end tax rebates for some gold retailers could weaken demand in one of the world's largest markets. TD Securities strategist Dan Ghali noted that "Chinese wholesale demand has already been weak, trending nearly 30% below its five-year average. The removal of VAT exemptions could discourage any near-term recovery in retail buying."
Earlier this year, gold demand in China and India surged, helping prices reach record highs. But with enthusiasm fading and domestic policy tightening, traders are increasingly uncertain whether this latest drop signals a longer correction or a short-term pause.
Geopolitical tensions continue to lend support to gold's long-term outlook. Ongoing conflicts in Eastern Europe and concerns over a potential U.S.-China confrontation have fueled central banks' accumulation of bullion reserves, a trend analysts describe as "monetary re-armament."
