Gold Slumps Amid Hawkish Fed Bets and Strengthening Dollar

Gold prices retreated from their daily highs of $4,376 on Tuesday as US Treasury yields rose and the US Dollar strengthened. Investors are pricing in further Federal Reserve tightening by year-end, which is curbing haven demand for bullion.

The announcement by US President Donald Trump that US and Iranian delegations met in a 'very productive meeting' sparked hopes of an end to the conflict. However, the Federal Reserve's decision to increase rates last week, along with hawkish comments from policymakers like Richmond Fed President Thomas Barkin, continued to pressure bullion prices.

Barkin stated that inflationary pressures will take some time to ease and additional rate hikes may be needed to push prices toward the 2% goal. Boston Fed President Susan Collins also supported a rate hike and warned of elevated inflation risks, noting 'an increased likelihood of future scenarios in which inflation remains notably above 2%.'

Despite hopes for an end to the US-Iran conflict and lower energy prices, money markets continue to price in a 53% chance of a 25-basis-point rate hike by the Fed at the October 28 meeting. The chances remain higher, at 90%, for the December meeting.