Gold slips as traders await Fed minutes for fresh policy direction

Gold prices edged lower on Tuesday as investors remained cautious ahead of the release of the Federal Reserve’s latest meeting minutes, looking for further insight into the outlook for US monetary policy.

By 05:30 ET (09:30 GMT), spot gold was down 1.0% at US$4,124.28 per ounce, while gold futures declined 0.8% to US$4,136.29 per ounce.

Stronger US dollar limits demand for gold

The precious metal remained under pressure as the US dollar strengthened alongside rising Treasury yields. The benchmark 10-year US Treasury yield climbed to its highest level in two weeks, supporting the greenback.

A stronger dollar generally makes gold more expensive for international buyers, reducing its appeal across global markets.

“[Foreign exchange] volatility may stay capped ahead of tomorrow’s FOMC minutes and given a rather empty U.S. data calendar today,” analysts at ING said in a research note.

Investors await clues from the Federal Reserve

Market participants are closely watching the publication of the minutes from the Federal Reserve’s June policy meeting later this week.

At that meeting, policymakers kept interest rates unchanged within a range of 3.5% to 3.75%, although several officials indicated that another increase in borrowing costs could still be appropriate this year.

Federal Reserve Chair Kevin Warsh has also indicated that he does not support providing forward guidance on future rate moves, although he acknowledged last week that inflation risks have moderated.

Interest rate outlook remains uncertain

Recent economic developments have added to uncertainty over the Fed’s next move. Softer-than-expected US employment figures and lower oil prices following the temporary ceasefire between the United States and Iran have eased some inflation concerns.

Nevertheless, higher interest rates continue to represent a headwind for gold because the metal does not generate income, making interest-bearing assets comparatively more attractive.

According to the CME FedWatch Tool, markets currently assign a 56% probability to a September rate hike, compared with around 60% before last week’s US jobs report.