Gold Prices Slump Amid Inflation Fears and Rate Hike Expectations

Gold prices fell on Tuesday as higher crude oil prices underscored inflation risks, increasing expectations of a US Federal Reserve rate hike. This move is expected to lift Treasury yields ahead of the central bank's policy meeting this week.

The spot gold price dropped by 0.7% to $4,266.49 (RM17,382.52) per ounce as of 0853 GMT, while US gold futures fell 1% to $4,307.40. Ole Hansen, head of commodity strategy at Saxo Bank, attributed the decline in gold prices to a combination of rising oil prices, a strong dollar, and higher long-end bond yields.

The US central bank will announce its policy decision on Wednesday at 1800 GMT, with traders currently pricing in a 92% chance of a 25-basis-point hike. A 25-basis-point hike would likely increase the opportunity cost of holding non-yielding precious metals like gold.