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Gold prices dropped on Tuesday towards their lowest since mid-February, hit in the previous session, as an imminent interest rate hike by the U.S. Federal reserve and a stronger dollar dulled bullion’s appeal.

Spot gold was down 0.1% at $1,861.80 per ounce, as of 0222 GMT. U.S. gold futures fell 0.2% to $1,860.00.

“Gold will come under pressure directly from higher interest rates and also indirectly from a stronger U.S. dollar,” said Michael McCarthy, chief strategy officer at Tiger Brokers, Australia.

There are short-term downside risks for gold and we’ve got a target range of $1,810 to $1,790, McCarthy added.

The dollar remained near recent 20-year highs, making gold less attractive for overseas buyers, while benchmark 10-year Treasury yields on Monday hit 3% for the first time since December 2018, a key psychological milestone.

The U.S. central bank’s Federal Open Market Committee will begin its meeting on interest rates later in the day and is expected to hike borrowing costs by half-a-percentage point when it announces its decision on Wednesday.

Gold dips as bond yields rise before Fed meeting

The Fed raised its policy interest rate by 25 basis points in March, and is soon likely to start trimming its asset holdings, as it attempts to tighten pandemic-era monetary policy and rein in soaring inflation.

Higher short-term U.S. interest rates and bond yields tend to increase the opportunity cost of holding zero-yield bullion.

The European Union was preparing sanctions on Russian oil sales over its invasion of Ukraine after a major shift on Monday by Germany, Russia’s biggest energy customer, that could deprive Moscow of a large revenue stream within days.

Bullion is seen as a safe store of value during times of economic and political crises.

Spot silver was flat at $22.63 per ounce, platinum climbed 0.3% to $938.01, and palladium advanced 1% to $2,239.69.

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