- Markets await Fed meeting on Wednesday for policy cues
- Traders see 74% chance of a US rate-hike in September
- Commerzbank lowers year-end gold price target by $300 to $4,500
July 28 (Reuters) - Gold fell on Tuesday, weighed down by a firm dollar that hovered near a one-month high, while investors awaited this week's U.S. Federal Reserve interest rate decision and comments from Chair Kevin Warsh for signals on the policy outlook.
Spot gold fell 0.7% to $4,045.29 per ounce by 11:55 a.m. EDT (1555 GMT), while U.S. gold futures for August delivery slid 0.8% to $4,045.20.
The U.S. dollar steadied near a one-month high on Tuesday, making greenback-priced bullion expensive for buyers overseas.
"Elevated energy prices remain an inflationary concern for Fed members, and the expected hawkish tilt by the Fed has forced interest rate hike expectations and the U.S. dollar higher, applying pressure on the gold market," said David Meger, director of metals trading at High Ridge Futures.
Bullion has fallen about 24% since the U.S.-Israeli war with Iran began in late February, pressured by expectations that war-driven inflation could keep interest rates higher for longer.
While gold is seen as a long-term hedge against inflation, higher rates typically weigh on the non-yielding metal.
Investors now await the Fed's rate decision and Chair Warsh's comments on Wednesday. Traders see a 71% chance of policymakers holding interest rates steady on Wednesday, while expecting a 74% chance of a rate hike at the central bank's September meeting. FEDWATCH
The U.S. Personal Consumption Expenditures data for June, due on Thursday, is also on the agenda this week, with investors expected to seek further cues on monetary policy.
Commerzbank lowered its year-end gold price forecast by $300 to $4,500 per ounce, adding that without a reversal in interest rate expectations, a lasting return of gold ETF investors and a recovery in gold price are unlikely.
On the geopolitical front, U.S. President Donald Trump said on Monday Washington was having "good talks" with Iran and that there was the chance of a resolution. However, he said U.S. strikes would resume if negotiations failed, while Iran issued similar comments about retaliation.
Among other metals, spot silver dropped 1.8% to 57.36 per ounce, platinum eased 0.1% to $1,619.25, and palladium fell 1.6% to $1,271.05.
Reporting by Noel John in Bengaluru; Editing by Leroy Leo
Source: Reuters