Gold prices drifted lower on Tuesday as a buoyant US dollar weighed on bullion, while investors looked towards the Federal Reserve’s upcoming policy announcement for clarity on the future of interest rates.
Spot gold declined by 0.7 per cent to $4,044.81 per ounce by 0250 GMT, following a rise of as much as 1 per cent during Monday’s session, reports Reuters.
Simultaneously, US gold futures for August delivery shed 0.8 per cent to settle at $4,045.40. The dollar’s strength, which saw it remain near a one-month high, has made greenback-denominated gold more expensive for holders of other currencies.
Ilya Spivak, the head of global macro at the finance content network Tastylive, noted that the market is currently “oscillating” within a narrow range between $3,950 and $4,200 as participants await signals from the US central bank.
He suggested that if the Federal Reserve’s language does not explicitly prepare the market for a rate hike in September, gold prices could potentially rally above $4,200 per ounce.
The US Federal Reserve is scheduled to conclude its two-day policy meeting on Wednesday.
According to CME FedWatch, market expectations for the Fed to hold interest rates steady currently stand at 62 per cent.
However, anticipation for at least a 25-basis-point hike has surged to 38 per cent, up significantly from the 16 per cent recorded just one week ago.
Looking further ahead, markets are pricing in an 81 per cent probability of a hike at the central bank’s September meeting.
Adding to the economic discourse, President Donald Trump on Monday called for the Fed to lower interest rates, asserting that the United States should maintain the lowest interest rates in the world.
On the geopolitical front, Trump stated on Monday that the United States was engaged in “good talks” with Iran, suggesting there was a possibility of a deal to resolve their conflict.
However, he issued a warning that military strikes would resume should negotiations fail. Following a pause in the US military campaign, Saudi Arabia, Jordan, and Iraq reported drone attacks on Monday, as Tehran appeared to test the situation.
Performance across other precious metals was also downcast. Spot silver fell 1.9 per cent to $57.30 per ounce, while platinum decreased by 1 per cent to $1,605.14. Palladium also slid, losing 1.6 per cent to trade at $1,271.09.
