Spot gold fell 1.1% to $4,034.31 an ounce on Tuesday as the U.S. dollar strengthened to near one-month highs. Traders are holding back before the Federal Reserve's policy decision on Wednesday, with markets pricing roughly a 40% chance of a rate hike this week, according to CME FedWatch. A pause in U.S.-Iran hostilities has eased fears of supply disruptions.
Gold prices fell modestly on Tuesday, with spot gold down 1.1% to $4,034.31 an ounce by 09:21 ET (13:21 GMT) and gold futures edging down 1.0% to $4,034.50 an ounce. The yellow metal gained modestly in the prior two sessions.
A firm dollar dents bullion's appeal
The U.S. dollar index, which tracks the greenback against a basket of currency peers, strengthened slightly on Tuesday and hovered near a one-month high. A stronger dollar can bode poorly for gold by denting bullion's appeal to overseas buyers.
Traders raise bets on a Fed hike
Markets broadly expect the Fed to leave interest rates unchanged when its two-day meeting concludes on Wednesday. Traders have, however, increased bets that policymakers could resume tightening later this year, with markets pricing roughly a 40% chance of a rate hike this week and an 80% probability of a September increase, according to CME FedWatch.
Analysts said gold remains trapped in a broad range as investors await clearer guidance from the central bank. Higher interest rates tend to reduce the appeal of non-yielding bullion.
Iran pause and falling oil ease price pressure
Investors also trimmed exposure before key U.S. economic data, including second-quarter GDP and the Fed's preferred inflation gauge, both due later in the week.
Meanwhile, U.S. President Donald Trump said on Monday that Washington was having "good talks" with Iran and there was a chance of reaching a deal, while warning that U.S. military strikes could resume if negotiations failed. The U.S. and Iran maintained a pause in hostilities after halting strikes over the weekend, easing fears of supply disruptions and offering some relief to inflation expectations.
Oil prices extended sharp losses on Tuesday, possibly alleviating some immediate energy-driven inflation worries.
Source: Investing.com
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