Spot gold was down 5.6% at $5,029.59 an ounce by 1450 GMT. Prices touched a four-week high in the previous session.
US gold futures fell 5.1% to $5,041.50.
“The decline in gold appears to be driven by a flight to liquidity — a flight to cash. We have a strong dollar and higher bond yields,” said Bob Haberkorn, senior market strategist at RJO Futures.
The US dollar, a competitive safe-haven asset, hit a more than one-month high, making dollar-denominated bullion less affordable for holders of other currencies. US Treasury yields rose for the second consecutive session.
“However, this decline in prices is likely to be short-lived, and the flight to safety driven by geopolitical risks should support higher gold and silver prices,” Haberkorn added.
On the geopolitical front, the Iran conflict entered its fourth day as explosions rocked Tehran and Beirut, while a senior official in the Iranian Revolutionary Guards said on Monday that the Strait of Hormuz had been closed. Benchmark crude oil jumped more than 8% in response on Tuesday.
Fawad Razakzada, market analyst at CitiIndex and Forex, said damage to energy infrastructure by Hormuz and tanker traffic raised the risk of continued strength in oil, gas and refined products, adding some support to gold as inflation fears and pushed back rate-cut expectations. Although considered a hedge against inflation and volatility, gold is generally preferred in low rate environments, as it bears no interest. Spot gold is up 17% so far this year, supported by global uncertainties following a stellar 64% jump in 2025. Meanwhile, silver is up around 12%.
Spot silver fell 11.2% to $79.42 an ounce after hitting a more than four-week high on Monday.
Elsewhere, platinum fell 12.6% to $2,013.65 and palladium fell 8% to $1,624.50.
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