Gold declines with the rise of dollar and anticipation of Fed meeting

Gold is on track for its third consecutive month of gains despite experiencing a price decline on Tuesday. This was driven by a strengthening dollar ahead of the Federal Reserve’s monetary policy meeting.

Spot gold fell by 0.6 percent to $2,320.54 per ounce by 06:32 GMT, while US gold futures dropped by 1.1 percent to $2,331.10.

The rise of the dollar index by 0.3 percent has made gold, priced in US currency, less appealing to holders of other currencies.

Kyle Rodda, a financial markets analyst at Capital.com, commented, “I think we are starting to see gold prices return to those basic levels. The dollar is rising and bond yields are rising after geopolitical risks recede, and there are some downside risks with the possibility that the Federal Reserve will adopt a hawkish tone in monetary policy.”

Despite Tuesday’s decline, gold has seen a nearly four percent increase this month, buoyed by robust purchases from central banks and safe-haven flows amid geopolitical tensions.

Market participants are eagerly anticipating the Federal Reserve’s monetary policy meeting, scheduled to begin on Tuesday and conclude on Wednesday, and the release of non-farm payrolls data on Friday. Expectations are that the Federal Reserve will maintain the benchmark interest rate unchanged between 5.25 and 5.5 percent at this meeting.

According to the CME Fed Watch tool, traders currently anticipate one interest rate cut this year, likely to occur in November. This anticipation is driven by data indicating persistent inflation and the hawkish rhetoric from Federal Reserve officials, including Chairman Jerome Powell.

In terms of other precious metals, silver fell in spot transactions by 1.5 percent to $26.72 per ounce, while the price of platinum declined by 0.4 percent to $943.52. Nevertheless, both metals are poised for monthly gains.

Palladium also experienced a decline, losing one percent to $964.25 an ounce.