Gold Prices Stagnate as Higher Rates Weigh on Sentiment

Gold prices struggled to gain momentum on Tuesday as investors weighed the prospects of higher interest rates staying in place for longer. Spot gold was little changed at $4,344.29 per ounce, while US gold futures steadied at $4,381.80.

The appeal of bullion tends to wane in a high-interest-rate environment as investors favour yield-bearing assets. With the US Federal Reserve raising its policy rate by a quarter of a percentage point last week and flagging more hikes in the coming months, gold is facing headwinds.

Chris Weston, head of research at Pepperstone, said that while crude oil prices have come off their recent highs, a reversal higher would intensify the rates story and further weigh on gold. The Fed will likely need to hike rates further to lower inflation resulting from strong demand as well as a commodity price shock.