Gold Prices Flat as Higher Interest Rates Weigh on Sentiment
Gold prices remained steady on Tuesday as investors awaited comments from US Federal Reserve officials for policy clues. The precious metal has been struggling to gain momentum due to expectations of higher interest rates, which make yield-bearing assets more attractive.
The spot price of gold was little changed at $4,342.41 per ounce by 0454 GMT, while US gold futures fell 0.1% to $4,379.30. Bullion is traditionally seen as a hedge against inflation and geopolitical risks, but its appeal wanes in high-interest-rate environments.
Investors will focus on comments from Fed officials for signs of whether the central bank is leaning towards another rate increase in October. Chris Weston, head of research at Pepperstone, noted that crude oil prices have come down modestly from recent highs, but a reversal higher would intensify the rates story and put further pressure on gold.
The Fed raised its policy rate by a quarter of a percentage point last week and flagged more hikes in the coming months. St. Louis Fed President Alberto Musalem said that it would be better for the Fed to act sooner than wait, as the central bank needs to hike rates further to lower inflation resulting from strong demand and commodity price shocks.