Gold Prices Slide as US Dollar Strengthens and Treasury Yields Rise

Gold prices fell on Tuesday due to a stronger US dollar and higher US Treasury yields. Spot gold was down 0.3% at $4,285.88 per ounce, its lowest point since August 7. This decline is attributed to the rising energy prices causing inflation worries, which in turn could lead to higher interest rates. Daniel Pavilonis, senior market strategist at StoneX, stated that 'higher energy prices cause more inflation. More inflation could cause higher interest rates. That's not good for gold … gold is in kind of a range-bound area.'

Investors are awaiting the Federal Reserve's rate decision on Wednesday, which is expected to be a quarter-point increase to 3.75%-4.00%. However, Pavilonis noted that 'a lot of (rate-hike fears are) already baked in … It really depends on what the Fed says afterward.'

The rising US dollar and Treasury yields make greenback-priced bullion more expensive for holders of other currencies, further pressuring gold prices. Analysts at ING stated that 'much of the hawkish Fed risk appears to be priced in. However, gold could remain vulnerable if policymakers signal rates will stay higher for longer.'