Dollar's Rise Puts Pressure on Gold as Hawkish Fed Looms

Gold prices fell towards $4,045 an ounce on Tuesday as investors anticipated a potentially hawkish Federal Reserve. The US dollar traded near a one-month high, increasing pressure on gold due to its non-yielding nature. According to CME FedWatch, there's a roughly 38% chance of a quarter-point increase in the Fed's target range.

This 'hawkish tilt' could strengthen the dollar and lift Treasury yields, making bonds more appealing relative to gold. Deutsche Bank analyst Michael Hsueh said in a note that resilient economic data and changing Fed expectations have become more important for gold than oil.

Hsueh projected gold at $4,800 in the fourth quarter if the Fed remains on hold indefinitely. However, he also warned of a risk case where pricing 3-4 Fed hikes could bring gold to $3,800 an ounce.