Gold prices fell more than 3% and traded below a key psychological level of $4,000 per ounce, under pressure from a firmer US dollar and growing expectations of interest rate hikes.
Spot gold fell 3.4% to $3,968.41 an ounce as of 1312 GMT, after hitting its lowest level since November 2025.
US gold futures declined nearly 4% to $3,984.40.
The US dollar firmed, making dollar-priced bullion more expensive for holders of other currencies.
Traders have ramped up bets on US interest rate hikes this year after the US central bank struck a hawkish tone at its latest policy meeting and as fears of inflationary pressures stemming from the Iran war persist.
"The market pricing a rate hike as soon as September due to a hawkish Fed, a surging dollar at 13-month highs combined with lower inflation expectations are putting heavy pressure on precious metals," Tai Wong, an independent metals trader, said.
"For gold, there is support just under $3,900 and central bank purchases continue, so a collapse is unlikely, but expect a potentially long period of consolidation as the gold trade is now out of favor," he added.
Gold becomes less attractive to investors when interest rates rise because it offers no yield.
Spot gold, which scaled a record peak of $5,594.82 in late January, has since shed over $1,600 an ounce.
ING analysts cut their gold forecasts, now expecting prices to average $4,300 an ounce in the third quarter of 2026 and $4,600 in the fourth, compared with their previous projections of $4,850 and $5,000, respectively, according to Reuters.
Investors are also awaiting US Personal Consumption Expenditures data, the Fed's preferred inflation measure, due on Thursday for further signals on the monetary policy outlook.
More hawkish signals from Fed officials or economic data that supports the argument for higher rates may translate to further downside risk for gold, said Lukman Otunuga, senior research analyst at FXTM.
Among other metals, spot silver fell 6% to $58.28 per ounce after hitting its lowest level since December 2025.
Platinum lost 4.3% to $1,580.76, and palladium dropped 4.9% to $1,177.50.
