Gold Prices Plunge as Rate Cut Bets Fade and Middle East Tensions Ease

Gold prices plunged on February 2, 2026, as investors scaled back expectations for Federal Reserve rate cuts and geopolitical risks in the Middle East subsided. Spot gold fell more than 2.5% to $1,985 per ounce, its sharpest single-day drop in over three weeks. Market-implied odds for a March rate cut dropped below 40%, down from nearly 70% a week earlier, following stronger-than-expected U.S. economic data. Concurrently, diplomatic efforts reduced fears of regional conflict, diminishing gold’s appeal as a safe-haven asset. The CME FedWatch Tool now shows traders pricing in fewer than two rate cuts for all of 2026.