Gold’s (XAU/USD) $5000 Retest: Rate cut fears and dollar surge lead to 5% selloff

• Gold (XAU/USD) plunged 5%, surprisingly ignoring the escalating safe-haven demand from the Middle East conflict.
• The selloff is primarily driven by rising oil prices sparking inflation fears, which led to reduced Fed rate cut expectations and a surging US Dollar.
• The technical outlook focuses on the $5000/oz retest, will bulls return or not?

Read More: Geopolitics and Crude: Why WTI pulled back despite escalating Middle East risks

The price of gold has fallen 5% on Tuesday as a combination of profit taking and a US Dollar surge appear to be weighing on the precious metal. This is a surprise given the tension in the Middle East where regional escalation appears to be coming to fruition.

The Middle East has seen a sharp escalation in conflict following a series of coordinated strikes and diplomatic withdrawals.

On Tuesday, explosions rocked Tehran and Beirut, while Iranian drones targeted the US embassy in Saudi Arabia, resulting in a fire and minor structural damage. This follows a similar drone strike on the US mission in Kuwait, prompting Washington to shutter both embassies and order the evacuation of non-emergency personnel and their families across the region.

As the violence intensifies, the strategic scope of the war has become clearer. Despite recent ambiguous statements from President Donald Trump and Prime Minister Benjamin Netanyahu regarding the conflict's duration, sources indicate that Israel’s campaign is moving faster than its initial two-week timeline. The primary objective is reportedly the removal of Iran’s clerical leadership, a goal for which there is currently no firm deadline.

The theater of war has also expanded into Lebanon, where Hezbollah forces have engaged Israel, triggering retaliatory air strikes and the reinforcement of Israeli ground positions in the south. In Beirut, heavy smoke and constant explosions have come to define the skyline, with local authorities reporting dozens of casualties as the fighting spreads.

The conflict appears to be escalating which in theory should benefit haven demand and thus Gold prices. However, today's selloff in Gold has market participants in a state of confusion.

This begs the question, what is driving the selloff in Gold?

The simple answer may lie in inflationary concerns due to the rise in Oil prices.

WTI is up around 14% since the start of the week and this has led to concerns about the impact this may have on inflation down the road. Markets are paying attention to this and it is having an impact on rate cut expectations for the Federal Reserve.

Just last week markets were pricing in around 60bps of rate cuts through December 2026, that number has now dropped to around 46bps of cuts, according to the latest LSEG data. The number had dropped to around the 40bps mark earlier in the day.

Mixed messaging from Fed officials today added to the concerns around inflation. Fed policymaker Schmid reiterated his concerns that demand is outpacing supply and that there is no room for complacency. However, Fed policymaker Williams struck a more upbeat tone, stating that recent inflation data has been reassuring.

It appears for now, inflationary concerns are driving a lot of volatility.

This coupled with the US dollar rising significantly as well appears to be weighing on the precious metal. The dollar appears to be the winner from safe haven flows at this stage as the Dollar Index (DXY) is trading at 6 week highs and approaching the psychological 100.00 level.

Another factor to consider is potential profit taking. After the surge in Gold prices after the weekend and at the start of the week, market participants could be locking in gains. This would lead to a drop off in the price of Gold as well and could be contributing to today's 5% decline.

From a technical standpoint, looking at the H4 chart for gold below and a $5000/oz retest has taken place.

This key psychological barrier needs to hold if bulls are to return and recover some of today's losses.

We have seen a bounce already with gold trading at $5095/oz at the time of writing. This has brought the price of the precious metal back to test the 100-day MA which rests around the $5090/oz mark.

A move beyond this may find resistance at the previous swing low around the $5128/oz handle before the 50-day MA at $5179/oz comes into focus.

A move lower here will first need to record a four-hour candle close below the $5000/oz handle before a retest of support at $4965/oz and the swing low from February 17,, which rests around the $4850/oz handle.

Gold (XAU/USD) Four-Hour Chart, March 3, 2026

Dropping down to a 15-minute chart given how quickly price is moving at the moment may provide further insight.

Looking at the chart below, I have drawn in two descending trendlines, an outer and inner one.

These trendlines may be used in conjunction with your own analysis to track a potential rebound and find trading opportunities.

Gold (XAU/USD) 15M Chart, March 3, 2026

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