Gold falls on firm dollar, spotlight on Fed's rate decision
GLD•Gold eases as dollar firms ahead of Fed decision
July 28 (Reuters) - Gold retreated on Tuesday, weighed down by a firm dollar, as investors hunkered down for the Federal Reserve's policy verdict at the end of its two-day meeting this week for insight into the direction of U.S. interest rates.
Spot gold XAU= fell 1.3% to $4,021.18 per ounce by 1020 GMT, while U.S. gold futures for August delivery GCcv1 slid 1.4% to $4,021.50.
"Gold has been holding to a very tight range based on support in the $4,000 region since late June, which suggests that at some stage there will be a break-out," said Rhona O'Connell, head of market analysis at StoneX.
"Fundamentally, the physical markets are still very quiet while professionals are contorting on the interaction between oil, interest rates and the dollar, all of which are important drivers," Connell added.
The U.S. dollar steadied near a four-week high on Tuesday, making greenback-priced bullion expensive for buyers overseas. USD/
On the geopolitical front, U.S. President Donald Trump on Monday said that Washington was having "good talks" with Iran and there was a chance of a deal to resolve their conflict, but warned that strikes would resume if negotiations failed to deliver.
Oil prices edged lower on Tuesday, hovering around one-week lows amid hopes for a resolution in the U.S.-Iran war. O/R
Elevated energy prices bolster expectations of higher interest rates by the Federal Reserve. While gold is typically seen as a hedge against inflation, higher interest rates tend to diminish gold's appeal due to its non-yielding characteristic.
Trump on Monday called on the Fed to lower interest rates, saying the U.S. should have the lowest interest rate in the world.
Market participants are bracing for the Fed's decision on interest rates tomorrow, where about 34% of participants expect a 25-basis-point rate hike, according to the CME FedWatch Tool. FEDWATCH
Additionally, traders are pricing in about an 81% chance of an interest rate hike at the central bank's September meeting.
