Gold Prices Slide on Strong Dollar and Rising Rate Hike Expectations

Gold prices dropped by over 1% to around $4,025 per ounce on Tuesday as the US dollar strengthened to near its highest level in a month. The rise of the dollar made gold more expensive for buyers using other currencies, reducing demand for the metal ahead of the Federal Reserve's rate decision.

The Federal Reserve is set to conclude its two-day policy meeting on Wednesday, with markets widely expecting rates to stay unchanged at this meeting. However, expectations for future rate hikes have grown, with markets pricing around an 80% probability of a hike in September. Higher interest rates tend to hurt gold because the metal pays no interest.

Analysts say gold remains stuck in a wide trading range and that clearer guidance from Fed Chair Kevin Warsh is needed before investors make larger moves. The strengthening US dollar, combined with easing geopolitical fears following US-Iran talks, also reduced safe-haven demand for gold.