FX.co ★ Gold Under Pressure on Stronger Dollar and Fed Rate Hike Bets

Gold prices hovered around $4,290 an ounce on Tuesday, their lowest level since early August, as a stronger US dollar and higher Treasury yields weighed on the metal. The pressure came amid elevated crude oil prices and growing expectations that the Federal Reserve will raise interest rates this week.

Oil prices remained high, trading well above $100 a barrel, after attacks on Saudi Arabia’s energy infrastructure shut down the East–West Pipeline and intensified concerns about global supply. Geopolitical risks further escalated due to ongoing tensions between the US and Iran over the Strait of Hormuz, as well as an increased Houthi presence near the Strait of Bab el-Mandeb.

Futures markets are fully pricing in a 25-basis-point rate increase by the Fed on Wednesday, with investors focused on policymakers’ forward guidance for clues on additional tightening. The Bank of Japan is also expected to raise interest rates on Friday, as elevated energy costs and persistent instability in the Middle East continue to cloud the global inflation outlook.