TLDR
- Spot gold dropped over 1% to around $4,025 per ounce on Tuesday
- A near one-month high in the U.S. dollar weighed on gold prices
- Markets price an 80% chance of a Fed rate hike in September
- U.S.-Iran talks eased geopolitical fears, reducing safe-haven demand
- Silver, platinum, and copper also fell on the day
Gold prices slipped on Tuesday as the U.S. dollar climbed to near its highest level in a month, reducing demand for the metal ahead of a key Federal Reserve decision.
Spot gold fell around 1.3% to $4,025.42 per ounce. Gold futures dropped by a similar amount to $4,023.45. The metal had posted small gains in the two sessions before Tuesday.
The U.S. Dollar Index held near a one-month high. A stronger dollar makes gold more expensive for buyers using other currencies, which typically reduces demand.
Fed Decision in Focus
The Federal Reserve is due to conclude its two-day policy meeting on Wednesday. Markets widely expect rates to stay unchanged at this meeting.
However, expectations for future rate hikes have grown. The CME FedWatch tool shows markets are pricing around a 40% chance of a hike this week and an 80% probability of one in September.
Higher interest rates tend to hurt gold because the metal pays no interest. Investors weigh that cost against holding bullion when rates rise.
Analysts said gold remains stuck in a wide trading range. Clearer guidance from Fed Chair Kevin Warsh is needed before investors make larger moves.
Traders also pulled back ahead of U.S. economic data due later in the week, including second-quarter GDP figures and the Fed’s preferred inflation measure, the PCE index.
Geopolitical Tensions Ease
On the geopolitical front, U.S. President Donald Trump said Washington was having “good talks” with Iran on Monday. He said a deal was possible but warned military strikes could resume if talks broke down.
The U.S. and Iran held a pause in hostilities after halting strikes over the weekend. That eased fears over energy supply disruptions and took some pressure off inflation expectations.
Oil prices extended losses on Tuesday, which also helped calm energy-driven inflation concerns.
With less geopolitical fear in the market, some of the safe-haven demand that had supported gold faded.
Other Metals Also Lower
Silver dropped 1.8% to $57.387 per ounce. Platinum fell 0.9% to $1,611.60 per ounce.
Industrial metals were also under pressure. Copper futures on the London Metal Exchange slipped 0.6% to $13,677.33 per tonne. U.S. copper futures fell 0.5% to $6.364 per pound.
Gold’s next move will likely depend on what the Fed signals about the path of interest rates when its meeting concludes Wednesday.
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