Dollar Surge Puts Gold in the Red Ahead of Fed Meeting

Gold prices took a hit on Tuesday, falling more than 1% to $4,025 per ounce as the US dollar index surged to near monthly highs. The strong dollar made gold more expensive for international buyers, dampening appetite for bullion ahead of the Federal Reserve's monetary policy announcement.

The Fed's two-day meeting wraps up on Wednesday, with market participants expecting interest rates to remain steady at the current level. However, speculation about upcoming rate adjustments has intensified, with a 40% likelihood of a rate increase this week and an 80% probability for a September move.

Rising interest rates typically create headwinds for gold, as the commodity generates no yield. Investors must weigh the opportunity cost of holding non-interest-bearing assets like bullion when rates climb.