Spot gold fell 0.4% to $4,154.99 per ounce by 1:36 p.m. EDT. US gold futures for December delivery were down 0.3% at $4,719 per ounce.
“We have some inflation data that’s coming out later this week. So market is kind of waiting to see how that plays out,” said Bob Haberkorn, senior market strategist at StoneX.
He noted that on Thursday the Fed chairman will deliver his last speech before the upcoming rate meeting, and anticipates a quieter session ahead of Wednesday’s and Thursday’s events.
Investors are looking ahead to the Consumer Price Index data on Wednesday, while Thursday’s Producer Price Index figures and remarks from Fed Chairman Kevin Warsh will be closely parsed.
Fed Governor Christopher Waller on Tuesday said the recent rise in US bond yields reflects stronger economic growth rather than higher inflation expectations, which remain “well anchored.”
Gold loses its appeal in a high-interest-rate environment as it does not yield interest.
Currently, traders see only a 19% chance of a Fed rate hike this month but are pricing in an 88% chance of a December increase, according to CME’s FedWatch tool.
Meanwhile, oil prices fell on Tuesday and were on track for their first decline in nearly a week.
The dollar and benchmark 10-year Treasury yields slipped from their respective highs, but still hovered near elevated levels.
The International Monetary Fund on Tuesday highlighted risks from elevated public debt levels and rising bond yields that may be driven higher still by war-driven inflation pressures.
“Interest rate hikes have increasingly become a double-edged sword for gold. While higher rates raise the opportunity cost of holding non-yielding assets such as gold, they also intensify the fiscal burden on many governments and thereby exacerbate debt sustainability concerns,” analysts at Commerzbank said in a note.