Gold Plummets Amid Reducing Rate Cut Expectations, Easing Middle East Tensions

(RTTNews) - Extending losses from the two previous sessions, gold prices plunged on Monday as the U.S. dollar gained amid diminishing investor expectations of U.S. Federal Reserve interest rate cuts in the coming months.

In addition, signs of cooling U.S.-Iran tensions and sudden increased margin requirements by the Chicago Mercantile Exchange compounded the decline.

Front Month Comex Gold for February delivery plummeted by $91.40 (or 1.94%) to $4,622.50 per troy ounce.

Front Month Comex Silver for February delivery also plunged by $1.5120 (or 1.93%) to $76.778 per troy ounce.

Last Friday, traders resorted to book profits from the recent gold and silver rally, resulting in a steep decline.

The fall was accelerated further by U.S. President Donald Trump's announcement of Kevin Warsh as his pick for the next Federal Reserve Chair. Warsh is known as an "inflation hawk" who prioritizes fighting inflation over growth and jobs, with investors "pausing" on expectations of Fed rate cuts.

As a result, Front Month Comex Gold for February delivery nosedived to $4,713.90 per troy ounce, while silver went for a freefall to $78.290 per troy ounce.

Today, gold prices pared some losses initially but gave ground later on increasing dollar strength.

Traders also studied the opposition to Warsh's appointment by Thom Tillis, a North Carolina senator belonging to Trump's own party.

Though Trump labelled Tillis an "obstructionist," Tillis (who sits on the Senate Banking Committee) asserted his opposition until his demand that the investigation opened by the U.S. Justice Department on current Fed Chair Jerome Powell's be resolved fully and transparently.

The U.S. dollar index was last seen trading at 97.68, up by 0.69 points (or 0.71%) today.

Last weekend, the Chicago Mercantile Exchange Group increased the margin requirements for future contracts of gold and silver with the hikes coming into effect from today.

For non-heightened risk profiles, the margins have been increased to 8% (from 6%) for gold and to 15% (from 11%) for silver.

For heightened risk profiles, the new margins are 8.8% (from 6.6%) for gold and 16.5% (from 12.1%) for silver respectively.

The Middle East tensions that escalated to a war-threat last week cooled to some degree today after Iran's media reported that Iran's President Masoud Pezeshkian ordered commencing nuclear talks with the U.S.

Last week, after assembling U.S. naval forces near Iran, Trump pressured Iran to strike a deal with the U.S. on its nuclear program or face harsh attacks.

Undeterred, Iran threatened a fitting retaliation and warned its neighbors not to facilitate the U.S. forces in their territories.

In Europe, a fresh round of talks on the U.S.-scripted peace plan to end the Russia-Ukraine war is set to begin this week.

The trilateral talks are likely to be held in Abu Dhabi by February 4 and 5 where the previous meeting was held last month but without a breakthrough.

Last Friday, Russia announced suspending attacks on Ukraine until today under Trump's request.

Despite the announcement by Russia and Ukraine about diplomacy route, front-line attacks still continue.

In the U.S., the S&P Global's manufacturing industry's Purchasing Manager's Index increased to 52.4 in January, above the preliminary estimate of 51.9 and up from December's five-month low of 51.8.

The ISM Manufacturing PMI unexpectedly rose to 52.6 in January from 47.9 in December 2025, much better than forecasts of 48.5 indicating that economic activity in the manufacturing sector expanded in January for the first time in 12 months.

The U.S. Federal Government is currently under partial shutdown which began on January 30 midnight.