Fed Rate Hikes Weigh on Gold Prices as Inflation Concerns Persist

Gold prices declined on Tuesday as Federal Reserve officials hinted at more interest rate hikes to combat inflation. Spot gold dropped 0.4% to $4,327.74 per ounce by 10:50 GMT.

The Fed's decision last week to raise its policy rate by 25 basis points and Chairman Kevin Warsh's warning of further hikes in the coming months weighed on gold prices. St Louis Fed President Alberto Musalem emphasized that more rate hikes are likely needed to cool inflation.

Market analysts expect at least one more rate hike by year-end, which could hurt gold prices. The precious metal typically serves as a hedge against inflation and geopolitical risks but loses appeal in high-interest-rate environments where investors favor yield-bearing assets.