Gold prices dipped on Tuesday as the U.S. dollar strengthened, with investors closely watching the Federal Reserve's upcoming policy meeting for clues on interest rate movements. Spot gold fell 0.2% to $4,007.29 per ounce, while U.S. gold futures for December delivery declined 0.5% to $4,019.70. The dollar's stability near a one-week high reduced the attractiveness of gold for international buyers.
Analysts noted that gold is currently consolidating after a sharp drop last week. Ilya Spivak, head of global macro at Tastylive, warned that a break below $3,900 could lead to a further decline, potentially testing the $3,800 level. Gold had previously fallen below the $4,000 mark for the first time since mid-July, marking its worst weekly performance in about four months.
The decline in gold prices was driven by rising energy costs, which stoked inflation concerns and reinforced expectations of further U.S. rate hikes. While the Federal Reserve is not expected to raise rates this week, investors remain skeptical about the longevity of any pause. Markets are also awaiting the release of the Personal Consumption Expenditures data on Thursday, a key inflation gauge for the Fed.
Traders are pricing in an 11% chance of a rate hike this week and an 82% chance of an increase in December, according to the CME's FedWatch Tool. Higher interest rates typically weigh on gold, as the precious metal does not offer yield. Meanwhile, other precious metals also saw declines, with silver, platinum, and palladium all posting losses.