Gold subdued by bets for more Fed rate hikes

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Gold prices edged lower on Tuesday on

expectations of more interest rate hikes by the U.S. Federal

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Reserve, while a softer dollar capped declines.

Spot gold fell 0.2% to $1,733.87 per ounce by 1121

GMT after hitting a one-month low of $1,719.56 on Monday. U.S.

gold futures shed 0.3% to $1,745.20.

“Gold prices remain under the mercy of rising Treasury

yields as markets come to terms with the Fed’s vow to digest to

tame soaring inflation,” said Lukman Otunuga, senior market

analyst at FXTM.

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“While a chunk of the downside risk may have been priced in

through the high chances of another jumbo rate hike, gold may be

exposed to further losses if the probability increases,” he

added.

At the Jackson Hole central banking conference in Wyoming

last week, the Fed and the ECB struck a hawkish tone, pledging

all efforts to tame high inflation even if economic growth takes

a hit.

The Fed has been raising borrowing costs since March, with a

majority of traders now expecting a 75 basis points hike in

September.

Any gain in gold therefore, is likely to be muted as Fed

chief “Jerome Powell’s comments highlighted that plenty of

intervention is still required to bring inflation under

control,” said Rupert Rowling, analyst at Kinesis Money.

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Although gold is considered a safe bet during economic

uncertainty, rate hikes increase the opportunity cost of holding

bullion.

On the data front, investors will scan the U.S. Consumer

Confidence report due later in the day.

If numbers continue to underline the trend that the economy

remains healthy despite high inflation, gold may get a slight

boost, Rowling added.

The dollar index eased from a two-decade peak,

limiting losses in greenback-priced bullion.

Spot silver edged 0.3% lower to $18.7 per ounce,

platinum shed 0.4% to $860.96 and palladium

dropped 0.9% to $2,128.16.

(Reporting by Arundhati Sarkar in Bengaluru; Editing by

Subhranshu Sahu)