Gold experienced follow-through selling, with spot gold weakening below the $4,050 level during the Asian session on Tuesday. This decline comes after failing to find acceptance above $4,100 the previous day. US gold futures for August delivery also dropped by nearly 1% or $1,213, trading at $141,850 per 10 grams on the Multi Commodity Exchange, in anticipation of the Federal Reserve's monetary policy decision.
The strengthening US dollar, which hovered near a one-month high, made dollar-denominated bullion more expensive for overseas buyers, contributing to gold's decline. Investors are keenly awaiting the Federal Reserve's crucial two-day policy meeting, expecting the central bank to keep interest rates unchanged but looking for signals on future policy paths and inflation trends from Fed Chair Jerome Powell's post-meeting remarks. Higher interest rates typically reduce the appeal of non-yielding assets like gold.
While geopolitical developments, such as the pause in US-Iran tensions easing oil prices, initially offered some safe-haven demand on Monday, the prevailing market sentiment shifted towards the Fed meeting. Analysts highlighted that the Fed's policy statement and upcoming US economic data will be primary drivers for precious metal markets in the near term. A Reuters poll also indicated a cut in gold price forecasts for 2026 for the first time since late 2023, with the median forecast now at $4,509 per troy ounce, down from $4,916 three months prior.
Adnan Agar, Interactive Commodities Director, noted that a hawkish tone from the Federal Open Market Committee could push gold lower, while a dovish stance might lead to a rebound, with market expectations leaning towards a somewhat hawkish tone. Despite some geopolitical support for safe-haven assets, the overwhelming focus remains on the US interest rate outlook. Spot gold was trading around $4,040 after a low of $4,011 and a high of $4,075 on Tuesday.
