Gold prices fell on Tuesday as rising crude oil prices fuelled concerns over inflation and strengthened expectations that the US Federal Reserve will raise interest rates this week.
Spot gold fell 0.2% to US$4,287.69 per troy ounce, equivalent to about RM17,467.19 per troy ounce or RM561.58 per gram, as of 7.13am GMT.
The precious metal had already fallen to its lowest level since Aug 7 on Monday.
US gold futures also declined 0.5% to US$4,328.10 per troy ounce, or about RM17,631.81 per troy ounce and RM566.88 per gram.
The Fed is scheduled to announce its monetary policy decision at 6pm GMT on Wednesday, following a two-day policy meeting.
Financial markets are widely expecting policymakers to raise the benchmark interest rate by a quarter percentage point to a range of 3.75% to 4%.
IG market analyst Tony Sycamore said the tone adopted by Fed chair Kevin Warsh following the rate decision could have a greater impact on gold than the rate hike itself.
“How Fed chair Kevin Warsh characterises the hike will be more important to gold than the hike itself.
“If he characterises it as the beginning of a tightening cycle that will be assessed at every meeting, it will put pressure on gold and risk assets overall,” he said.
However, Sycamore said gold could receive support if Warsh signals that the Fed is more inclined towards a measured pace of future rate increases.
Gold is often viewed as a hedge against inflation and geopolitical risks, but the precious metal typically becomes less attractive when interest rates rise because it does not generate interest income.
Data released on Friday showed US consumer prices rose faster in August, while the core inflation measure recorded its biggest increase in four months.
On the geopolitical front, Iran-backed Houthi forces in Yemen launched a fresh wave of attacks against Saudi Arabia while strengthening their position along Yemen’s western coast on the Red Sea.
Oil prices also climbed as concerns over supply disruptions persisted, with higher energy costs potentially adding to inflationary pressures across the economy.
Meanwhile, the bond market weakened, pushing the yield on the 10-year US Treasury note to its highest level since 2007.
Among other precious metals, spot silver fell 0.4% to US$62.98 per troy ounce, equivalent to about RM8.25 per gram.
Platinum rose 0.1% to US$1,761.12 per troy ounce, or about RM230.66 per gram, while palladium fell 0.8% to US$1,282.79 per troy ounce, equivalent to about RM168.01 per gram.
