Gold slides over 2% on strong dollar in light liquidity trade

Gold dropped more than 2% on Tuesday, as holidays in major markets hit liquidity, while a stronger dollar and easing geopolitical tensions added to the pressure.

Spot gold XAU= dropped 1.5% to $4,917.90 per ounce by 0800 GMT after hitting $4,862 per ounce, its lowest level in more than a week. U.S. gold futures GCcv1 for April delivery lost 2.2% to $4,936.60 per ounce.

"Thin liquidity with the holidays in the last 24 hours, especially in China and Asia, but also obviously in the United States too, means we just lacked a bid in the market," said Kyle Rodda, senior market analyst at Capital.com.

Mainland Chinese, Hong Kong, Singapore, Taiwan and South Korea markets are closed for the Lunar New Year holidays. U.S. markets were shut on Monday for Presidents' Day.

The U.S. dollar index .DXY rose 0.3% against a basket of currencies, making greenback-priced bullion more expensive for holders of other currencies. USD/

The minutes of the Federal Reserve's January meeting, due Wednesday, could give investors further clues about the central bank's future monetary policy path. The market currently expects the first of three interest rate cuts for the year to be in June, according to CME's FedWatch Tool.

"Now it's going to be interesting to see what these FOMC minutes say in the sense that the markets want many more rate cuts now than what the Fed said that it would do," said Ilya Spivak, head of global macro at Tastylive.

Non-yielding bullion tends to do well in low-interest-rate environments. FEDWATCH

On the geopolitical front, U.S. President Donald Trump said Monday he would be "indirectly" involved in U.S.–Iran nuclear talks in Geneva on Tuesday, while Ukrainian and Russian representatives will also meet there this week for U.S.-mediated peace discussions.

"The immediate range top (for gold) is somewhere around $5,120, but the next real kind of objective here is back to the highs at $5,600 or so, and then of course, we march to record highs," Spivak said.

Spot silver XAG= fell 2% to $75.05 per ounce, after dropping over 5% earlier.

Spot platinum XPT= dropped 1.5% to $2,010.72 per ounce, while palladium XPD= lost 1.9% to $1,692.

-Pablo Sinha/Reuters