On Monday (October 21st), during the New York trading session, gold prices fell significantly after reaching a record high, due to rising U.S. Treasury yields and a stronger dollar, which offset the support provided by the uncertainty of war in the Middle East. Gold prices closed lower for the day.

Spot gold touched a record high of $2,740.58 per ounce in the early morning of the New York session on Monday. However, gold prices then plummeted, with the lowest point during the New York session reaching $2,714.13 per ounce.

By the close of trading on Monday, spot gold had fallen by approximately 0.1%, to $2,719.49 per ounce.

FXStreet analyst Christian Borjon Valencia noted that during Monday's North American trading session, gold prices hit new highs, but the rise was paused due to the increase in U.S. Treasury yields and the strengthening of the dollar. Over the past five trading days, tensions in the Middle East have increased the flow of funds into safe-haven assets.

The 10-year U.S. Treasury yield rose to a 12-week high, and the U.S. Dollar Index, which tracks the value of the dollar against a basket of six currencies, also increased, making gold more expensive for overseas buyers.

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Daniel Pavilonis, a senior market strategist at RJO Futures, stated, "The significant rise in the 10-year U.S. Treasury yield and the strengthening of the U.S. Dollar Index have put some pressure on gold prices."

On Monday, the yield on the 10-year U.S. Treasury note soared by more than 10 basis points, reaching 4.192%. The U.S. Dollar Index (DXY), which tracks the dollar's value against a basket of six currencies, rose by 0.50%, reaching a two-month high of 104.01.

Analysts pointed out that although gold prices have retreated from their highs, geopolitical tensions will continue to provide support for gold prices.

As a safe-haven asset for political and economic uncertainty, gold has risen by more than 32% this year and has broken historical highs on multiple occasions. This is mainly due to the Federal Reserve's rate cuts, coupled with market demand for safe-haven assets, creating a perfect storm for gold's rise.

Pavilonis noted, "We are seeing the geopolitical situation in the Middle East fermenting, whether it's Israel, Iran, or other things happening behind the scenes."Hostilities in the Middle East continue, with Israel revealing that a shell from Lebanon hit an open area in central Israel.

How to trade gold?

FXStreet analyst Christian Borjon Valencia notes that gold prices are poised to continue their upward trend, but the "Gravestone Doji" pattern could open the door for a gold price pullback.

Valencia says that momentum shows that buyers are still in control of the market, but the Relative Strength Index (RSI) indicates that they are losing some momentum. Although the RSI is bullish, it has flattened.

Valencia points out that if gold prices break through the high of $2,740 per ounce on October 21, the next target will be $2,750 per ounce, followed by $2,800 per ounce.

On the other hand, Valencia adds that if gold prices fall below $2,700 per ounce from their historical highs, it could pave the way for further pullbacks. In this case, the first support for gold prices will be the high of $2,696 per ounce on October 17, followed by the high of $2,670 per ounce on October 4.