Gold Slips as Traders Price In Another Fed Rate Hike

Gold fell on Tuesday as a stronger dollar and expectations of further Federal Reserve rate increases pressured bullion. Spot prices were down 0.5% at $4,320.19 an ounce in early trading, while U.S. gold futures fell 0.7% to $4,355.90.

The dollar index, which tracks the U.S. currency against major peers, rose to 100.50, according to the InvestorsHub report. A stronger dollar makes gold more expensive for buyers using other currencies, which can curb demand.

Rate expectations added to the pressure. Traders saw a 90% chance of another Fed increase in December, up from 80% the previous week, Reuters reported, citing CME FedWatch data. The central bank raised rates last week and officials have signaled further tightening may be needed.

Higher rates can weigh on gold because the metal pays no interest. When borrowing costs rise, investors may favor assets that offer a return, such as bonds.

Fed officials Alberto Musalem and Austan Goolsbee pointed to strong demand and higher energy costs as inflation risks. Their comments kept attention on whether policymakers will lift rates again before year-end.

Oil prices offered a counterpoint. Crude fell to a two-week low on Tuesday as Gulf supply prospects improved, easing some concern that energy costs could push inflation higher. Lower oil can reduce pressure for more rate hikes, but it did not offset the dollar’s gains.

Gold had already lost more than 22% from its January record of $5,594.82 an ounce, Reuters reported. The latest move leaves traders weighing the impact of monetary tightening against demand for bullion as a hedge against inflation and geopolitical risk.

Investors are watching upcoming Fed comments for clues on the timing of any next move. Oil prices and the dollar remain key signals for gold’s near-term direction.