Gold slips as stronger dollar weighs ahead of Fed meeting

what happened

Gold prices slipped on Tuesday as a firmer US dollar made dollar-priced bullion less attractive to overseas buyers. Reuters reported that spot gold was down 0.2% at $4,007.29 an ounce by 0321 GMT, while December US gold futures lost 0.5% to $4,019.70. Investors were focused on the Federal Reserve's policy meeting, with the decision due Wednesday and the PCE inflation data due Thursday.

Bullion fell below $4,000 for the first time since mid-July last week and recorded a weekly loss of 4%, its steepest in roughly four months. Higher energy prices have stoked inflation worries and strengthened expectations of further US rate hikes. According to CME FedWatch, traders price about an 11% chance of a hike this week and 82% for a December increase.

Silver lost 0.7% to $53.53 an ounce, platinum slipped 0.8% to $1,514.16 and palladium fell 1.5% to $1,034.75. Separately, a Saudi-led coalition in Yemen said it had shot down three ballistic missiles and drones fired by the Houthis toward two Saudi regions.

why it matters

Gold is often viewed as a hedge against inflation, but higher interest rates reduce its appeal because it pays no yield. Expectations of tighter US monetary policy therefore keep pressure on precious metals, and silver, platinum and palladium moved in the same direction.

market impact

Gold and precious metals: a stronger dollar and bets on Fed hikes pressure metal prices.

tags

instruments