Gold Falls as Fed Rate Hike Bets Lift US Dollar

Gold prices fell on Wednesday as investors bet on further interest rate hikes by the Federal Reserve (Fed), sending the US Dollar to a two-month high. The US Dollar Index (DXY) climbed to 100.85, despite a drop in Oil prices due to positive Middle East developments. The Fed raised rates by 25 basis points last week, with its updated projections pointing to one more hike this year. Richmond Fed President Thomas Barkin said economic conditions are firming and high inflation risks affecting future inflation.

The US Dollar's strength, combined with rising Treasury yields and expectations of higher borrowing costs, leaves Gold vulnerable to further losses. The CME FedWatch Tool puts the chance of an October hike at around 53%. Preliminary US S&P Global Purchasing Managers' Index (PMI) data later on Wednesday will be closely watched for clues on the strength of the economy.