Gold subdued on dollar strength, Fed rate-hike jitters

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Gold prices fell on Tuesday, pressured by

an elevated dollar, while the prospect of aggressive U.S. rate

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hikes for a longer period also weighed on the non-yielding

bullion’s appeal.

Spot gold was down 0.3% at $1,732.10 per ounce, as of

0736 GMT, having hit a one-month low of $1,719.56 in the

previous session.

U.S. gold futures were also down 0.3% at $1,744.10.

The dollar index hovered near a two-decade peak hit

on Monday.

Gold will continue to be driven by sentiment in the dollar

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in the short term, said Stephen Innes, managing partner at SPI

Asset Management.

At the Jackson Hole central banking conference in Wyoming,

the U.S. Federal Reserve and the European Central Bank struck a

hawkish note, pledging all efforts to tame stubbornly high

inflation even if growth takes a hit.

“Powell’s speech appears to have hit home finally, which

could make any significant upside in gold very challenging.

We’re seeing weakness in gold around $1,730, a break of which

will draw focus to $1,680-1,700, which is the next big support

zone,” said Craig Erlam, senior market analyst at OANDA.

While gold is considered a safe bet during economic

uncertainty, interest rate hikes increase the opportunity cost

of holding bullion.

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Markets are now largely pricing in a 75-basis-point rate

hike at the Fed’s September meeting.

“The market’s in a wait-and-watch mode to see how the

economic data plays out, and if it starts to get bad in the U.S.

I think that’s going to encourage the gold bulls to come back

into the fray again,” Innes added.

Reflecting investor sentiment, holdings in SPDR Gold Trust

, the world’s largest gold-backed exchange-traded fund,

fell 0.4% to 980.61 tonnes on Monday.

Spot silver fell 0.2% to $18.72 per ounce, platinum

dropped 1.2% to $853.63, while palladium inched

0.1% higher to $2,149.53.

(Reporting by Eileen Soreng in Bengaluru; Editing by Rashmi

Aich, Uttaresh.V and Sherry Jacob-Phillips)