Gold prices recorded a decline on Tuesday as surging crude oil prices fueled inflation concerns, strengthening expectations that the US Federal Reserve will raise interest rates this week, according to Reuters. Rising US Treasury yields and a stronger dollar also placed additional pressure on the precious metal.
According to Reuters, spot gold fell 0.7 percent to $4,266.49 per ounce on Tuesday. Prior to this, gold had touched its lowest level since August 7 on Monday. Meanwhile, US gold futures also dropped nearly 1 percent to $4,307.40 per ounce.
Market attention is now focused on the outcome of the US Federal Reserve’s meeting. The Fed is scheduled to announce its monetary policy decision on Wednesday. There is a strong expectation in the market that the central bank may raise its benchmark interest rate by 0.25 percent.
Gold does not yield interest, meaning that when interest rates and bond yields rise, interest-bearing assets become more attractive to investors relative to gold. According to Reuters, the US 10-year Treasury yield reached its highest level since 2007 on Tuesday. Additionally, a stronger dollar increases the cost of holding gold for investors using other currencies.
According to analysts, the rise in oil prices could escalate inflationary pressures. This increases the likelihood that the Fed will keep interest rates higher for longer or raise them further rather than cutting them, which is viewed as a negative signal for gold prices.
