Dollar Strength Weighs on Gold as Fed Meeting Looms

Gold prices took a hit on Tuesday as the strong dollar weighed in. The yellow metal dropped by 0.7% to $4,045.89 per ounce by 0448 GMT, down from its peak of 1% on Monday.

The US gold futures for August delivery also lost 0.8% to $4,046.20. According to Ilya Spivak, head of global macro at finance content network Tastylive, the market is 'oscillating in this narrow range between $3,950 and $4,200'.

The dollar's strength made gold more expensive for holders of other currencies. Markets are now looking to the Federal Reserve's upcoming policy decision on Wednesday for clues on interest rate outlook.

Expectations that the Fed will hold interest rates steady stand at 62%, while 38% of market participants expect at least a 25-basis-point rate hike, according to CME FedWatch. Markets are pricing in an 81% chance for a hike at the central bank's September meeting.