Gold Tumbles Below $4,350 Amid Rising Oil Prices and Higher Interest Rates

Gold prices slipped below $4,350 on Tuesday as investors reacted to rising oil prices and higher interest rates. The market treated the jump in oil as a reason to expect tighter monetary policy, rather than an opportunity to buy gold as an inflation hedge.

The SPDR Gold Shares ETF (GLD) traded at $394.31, down 1.35% from Monday's close. COMEX gold futures also fell to $4,344, down 1.4%. The decline comes as the 10-year Treasury yield reached 4.996%, up almost 16 basis points from the previous close.

The strong dollar and rising interest rates make holding gold less attractive, while the recent increase in oil prices complicates the relationship between gold and inflation. Traders are assigning a high probability to a quarter-point Federal Reserve rate hike, which would further pressure gold prices.

However, some analysts suggest that if the Fed's decision on Wednesday is seen as a limited response to the energy shock, yields could retreat even after the policy rate goes up. A surprise hold by the Fed could also initially pull yields lower and support safe-haven demand for gold.