Gold fell Tuesday, weighed down by a firmer dollar and increased US bond yields, as the Federal Reserve gears up for a steep rate hike to tame inflationary pressures.
Spot gold fell 0.5% to $1,668.30 an ounce at 1107 GMT. US gold futures had changed little at $1,676.60.
“Gold is under pressure, staying close to the two-year low it reached Friday, and the main reason for this is the strong dollar,” said Ricardo Evangelista, senior analyst at ActivTrades.
“The Fed decision is coming tomorrow (Wednesday) and it is expected to raise interest rates by 75 basis points. However, there is an external chance that we could see a 1% increase and if this were to happen I think there would be more his disadvantage for gold.”
The dollar remained firmly near its two-decade high, making gold less attractive to other currency holders. Ten-year US Treasury yields as a benchmark hovered around their highest level since 2011.
The Fed is likely to implement its third consecutive super-large 75 basis point rate hike at the end of its two-day policy meeting on Wednesday.
The Bank of England and the Bank of Japan will decide on the policy on Thursday. Central banks around the world continue their fight against rising inflation.
While gold is considered a hedge against inflation, higher interest rates increase the opportunity cost of holding zero-yielding precious metals.
One indication of sentiment is that holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, have fallen to their lowest level since March 2020.
According to Craig Erlam, senior market analyst at OANDA, gold could face a lot more turbulence this week given the magnitude of tightening ahead.
Spot silver fell 1.7% to $19.27 an ounce, while platinum rose 0.3% to $922.15.
Palladium fell more than 3% to $2,147.87.
(This story was not edited by DailyExpertNews staff and was generated automatically from a syndicated feed.)