Gold slides below $4,100 as Fed rate-hike bets pressure prices

Gold has fallen more than 3% since the Federal Reserve's hawkish pivot, with the dollar at a one-year high compounding headwinds for the precious metal.

COMEX gold fell 1.7% to $4,121.09 an ounce on Tuesday, touching a one-week low of $4,090.27, as the U.S. dollar strengthened to its highest level in more than a year. Bullion extended losses Wednesday, sliding another 1% to $4,067.51, its weakest since June 11.

"The strength of the dollar, reinforced by last week's hawkish tilt from the Fed, is creating a headwind for gold prices," Ricardo Evangelista, analyst at ActivTrades, said.

Almost half of Federal Reserve policymakers at last week's meeting indicated they now expect rates to rise this year, with traders pricing in a 69% chance of a September hike, up from 29% a week earlier, according to the CME FedWatch Tool. Markets are now pricing three rate increases this year, compared with just one before the Fed meeting. Gold has lost about 23% since the onset of the U.S.-Israeli war on Iran in late February, as mounting inflationary pressure has driven expectations of tighter monetary policy.

Deutsche Bank analyst Michael Hsueh said in a note that in a revised base case, the bank expects gold to reach $4,800 an ounce in the fourth quarter, consistent with an indefinite Fed hold, although a risk case of three to four rate hikes may bring gold closer to $3,800 per ounce.

Dollar Strength Weighs on Broader Precious Metals Complex

The dollar's rally pressured other precious metals as well. Spot silver slid 4.7% to $62.12 an ounce, platinum lost 2.6% to $1,634.85, and palladium slipped 2.4% to $1,235.06. The greenback's advance makes dollar-denominated commodities more expensive for overseas buyers, compounding the impact of rising rate expectations.

Standard Chartered analyst Suki Cooper noted that the gold market had been looking to the psychological $4,000 milestone for support following the Iran peace deal, but sentiment has swung to selling on price rallies.

Key Levels and Forward Catalysts

"If we continue to mostly focus on inflation and we take out the $4,000 level, then we're going to be in the direction of $3,800, and we're going to have a conversation about whether a test of $3,500 follows next," Ilya Spivak, head of global macro at Tastylive, said.

Investors are now watching for the U.S. Personal Consumption Expenditures data, the Fed's preferred inflation gauge, due Thursday, for further cues on monetary policy. A hotter-than-expected reading could reinforce hawkish expectations and push gold toward the $4,000 threshold, while a softer print may provide temporary relief for the precious metal.

This article is for informational purposes only and does not constitute investment advice.