NEW YORK: Gold prices fell on Tuesday, pressured by a stronger US dollar and elevated US Treasury yields, as a rally in crude oil prices fuelled inflation worries and bolstered expectations that the Federal Reserve would raise interest rates this week.
Spot gold was down 0.3percent at USD4,285.88 per ounce, as of 9:23 a.m. EDT (1323 GMT), after hitting its lowest point since August 7 on Monday. US gold futures fell 0.6percent to USD4,325.80.
“Higher energy prices cause more inflation. More inflation could cause higher interest rates. That’s not good for gold … gold is in kind of a range-bound area. It could actually sell off more if rates continue to move higher,” said Daniel Pavilonis, senior market strategist at StoneX.
Traders now await the Fed’s rate decision, which is due to be announced at 2 p.m. EDT (1800 GMT) on Wednesday. Financial markets are betting heavily that US central bank policymakers will lift the benchmark overnight interest rate by a quarter of a percentage point to the 3.75percent-4.00percent range, and signal further tightening ahead. “I think a lot of (rate-hike fears are) already baked in … It really depends on what the Fed says afterward. Are they going to continue to raise rates? Are they going to monitor the situation? Overall, it’s not a good look for gold,” Pavilonis said.
The dollar rose, making greenback-priced bullion more expensive for holders of other currencies, while benchmark 10-year US Treasury yields rose to their highest level since 2007.
While gold is traditionally viewed as a hedge against inflation and geopolitical uncertainty, higher yields on risk-free Treasuries reduce the appeal of the non-yielding metal.
“Much of the hawkish Fed risk appears to be priced in. However, gold could remain vulnerable if policymakers signal rates will stay higher for longer,” analysts at ING said in a note.
Oil prices edged higher after attacks on Saudi Arabian energy infrastructure left the kingdom’s East-West Pipeline offline, raising fears that damage to energy infrastructure and transport routes could take longer to repair. Among other metals, spot silver rose 0.7percent to USD63.64, platinum gained 0.8percent to USD1,773.13 and palladium was up 0.5percent at USD1,299.76.
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