The SPDR Gold ETF (GLD) experienced a sharp intraday decline of 5.07%. This significant drop occurred during Tuesday's trading session, contrasting with the typical expectation that gold would rally as a safe-haven asset amid escalating Middle East tensions.
The decline is attributed to a confluence of factors, primarily a strengthening US dollar and profit-taking by investors. Despite heightened geopolitical risks following US-Israeli airstrikes on Iran and retaliatory threats to close the Strait of Hormuz, the US dollar has gained strength. Analysts note this dollar strength is driven by energy dynamics, as the United States, being a net energy exporter, benefits from rising oil prices, attracting capital flows away from gold.
Furthermore, market participants engaged in profit-taking after gold's recent rally, with the precious metal having risen for several consecutive sessions prior to the pullback. The combination of a robust dollar, which typically pressures dollar-denominated gold, and the realization of gains from earlier safe-haven positioning led to the sharp sell-off in the gold-backed ETF.
