Gold Prices Slide as US Dollar Strengthens on Hawkish Fed Outlook

Gold prices have been experiencing follow-through selling for the second consecutive day, and bears are looking to push prices below $4,300 during the first half of the European session on Tuesday. The US Federal Reserve's (Fed) hawkish outlook is a major factor driving flows away from gold, as it underpins the value of the US Dollar.

The Fed's updated Summary of Economic Projections showed that officials expect at least one more rate hike this year, and Boston Fed President Susan Collins and St. Louis Fed President Alberto Musalem have backed further policy tightening due to elevated inflation risks. Meanwhile, crude oil prices have staged a modest recovery from their nearly two-week low, reviving inflationary concerns and supporting US bond yields.

This keeps the USD near its highest level since late July, exerting pressure on gold and suggesting that the path of least resistance for the metal is to the downside. However, the downside seems limited as traders await further developments surrounding the Middle East crisis and their implications for inflation, which would influence interest rate expectations and drive the bullion.