Gold fell on Tuesday as a firmer US dollar and rising Treasury yields pressured bullion. Traders held back ahead of the Federal Reserve's June meeting minutes, due later this week, for fresh signals on the path of US interest rates.
Spot gold fell 1.0% to US$4,124.28 an ounce by 05:30 ET (09:30 GMT) on Tuesday, while gold futures were down 0.8% at US$4,136.29 an ounce. Traders stepped back as they waited on the Federal Reserve's latest policy meeting minutes for clues on the outlook for US rates.
A stronger dollar weighs on bullion
The metal came under pressure as the US dollar strengthened and benchmark 10-year US Treasury yields climbed to their highest level in two weeks. A firmer dollar typically cuts demand for gold by making it more expensive for buyers using other currencies.
According to ING: "[Foreign exchange] volatility may stay capped ahead of tomorrow's FOMC minutes", the bank said in a research note, pointing to a thin US data calendar.
Markets look to the Fed for policy clues
Attention has turned to the minutes from the Federal Reserve's June meeting. At that meeting, policymakers left interest rates unchanged in a target range of 3.5% to 3.75%, though several officials signalled that another rate increase could still be appropriate before year-end. New Fed Chair Kevin Warsh has said he does not favour giving forward guidance on rates, but acknowledged last week that inflation risks have eased.
Softer-than-expected US employment data from last week and lower oil prices after the June US–Iran interim ceasefire have also shaped expectations. Investors remain uncertain how the Fed will weigh easing inflation against the case for keeping policy restrictive, since higher rates generally reduce the appeal of non-yielding assets such as gold. Traders now assign a 56% probability to a rate increase in September on the CME FedWatch Tool, down from around 60% before the latest jobs report.
Source: Yahoo Finance
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