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Spot gold fell 2% – its biggest one-day drop in nearly seven weeks – on Monday and is now down for four out of the last five trading sessions as the strengthening dollar and a sharper appetite for assets seen as higher risk led to selling across commodities.

The dollar index is now at 94.04, its highest since April 28, making the dollar-denominated metal pricier for those who have to buy it in other currencies. However, the metal is still up by around 20% for the year to date, and analysts don’t see the factors that have supported it fading away anytime soon.

Indeed, Commerzbank analysts said in research note on Tuesday that “financial investors clearly took profits after the gold price shot up on Friday,” pointing out that the move higher on Friday had been driven not by fundamentals, but instead speculation.

They weren’t alone.

“We expect gold to strengthen towards the later part of Q3, through to Q4, potentially testing $1,350,” UBS analyst Jon Teves wrote, adding that the Swiss bank expects seasonal physical demand to also drive prices up.

“The expectation of downward pressure from a Fed rate hike is only thought to have a temporary impact on gold, and ‘safe haven’ demand will pull investors back,” Teves said in a research note.

Bullion has fallen in five out of the past six sessions, having failed to hold above resistance at $1,300, and not benefitting much from data last week showing that the U.S. economy added the fewest jobs in seven months in April.

HSBC analyst James Steel said the price of gold "looked increasingly overextended up around $1,300," adding that demand at gold-backed exchange-traded funds has moderated in the past six weeks. "We remain longer term relatively positive but believe we are entering a corrective phase that may take prices closer to the $1,220 level near term," Steel wrote in a note. "If the dollar continues to rally back, gold may be further pressured."

Reference: MoneyAM, Reuters