Gold dropped close to 2% in a single session as a stronger U.S. dollar and growing market bets on further Federal Reserve rate hikes weighed on the metal. Rising real yields increase the opportunity cost of holding non-yielding gold, and dollar strength mechanically compresses dollar-denominated commodity prices. The move reflects a repricing of the Fed's terminal rate rather than a shift in inflation expectations alone.

The key tension now is whether this is a tactical flush or the start of a sustained reversal: gold has historically rebounded sharply when Fed tightening cycles approach their end, but if the market continues to price in additional hikes, the dollar can sustain pressure on gold. Upcoming CPI prints, FOMC minutes, and Fed speakers are the near-term catalysts to watch.