Gold prices were flat on Tuesday in thin trading due to a U.S. holiday, while traders awaited the U.S. Federal Reserve’s minutes of the June meeting on Wednesday for more clues on its interest rate hike path ahead.

Spot gold was little changed at $1,921.39 per ounce by 0241 GMT, while U.S. gold futures were flat at $1,929.10.

Trading volume could be light due to a U.S. holiday.

Gold heads for quarterly fall as more rate hikes loom

“Right now the headwinds for gold are the expectations of a further 50 bps tightening, more liquidity withdrawal and rates remaining relatively elevated for some time after the Terminal value has been reached,” said Nicholas Frappell, global head of institutional markets, ABC Refinery.

Investors see a nearly 90% chance of a 25-basis-point hike in July, according to CME’s Fedwatch tool, bringing rates into the 5.25%-5.50% range before cuts are seen after March in 2024. High interest rates discourage investment in non-yielding gold.

The dollar index held steady.

U.S. manufacturing slumped further in June to the lowest reading since May 2020 per data on Monday, yet price pressures continued to deflate since bottlenecks in the supply chain have eased considerably and higher borrowing costs dampen demand.

Markets will also watch for minutes of the June 13-14 FOMC meeting being released on Wednesday.

While gold prices could recover to $1,940 before a potential drop lower, “the rates background remains a significant drag,” Frappell added.

Japan’s top financial diplomat Masato Kanda said authorities were in close contact with U.S. and other overseas authoritiesin lieu of the yen falling to a near eight-month low against the dollar last week.

The Reserve Bank of Australia’s (RBA) policy decision would also be watched during the Asian market hours.

Spot silver rose 0.1% to $22.91 per ounce, platinum was up 0.6% to $912.15 while palladium jumped 2% to $1,253.95.