Gold prices fell on Tuesday as investors awaited signals about the possibility of a slower-than-expected monetary easing cycle during the U.S. Federal Reserve's two-day meeting that begins later today.
The yellow metal fell in spot trading by about 0.1% to $4,183.30 an ounce.
Meanwhile, US gold futures for December delivery settled at $4214.40 an ounce.
Kelvin Wong, senior market analyst at OANDA, said investors are rebalancing their positions broadly ahead of the US Federal Reserve meeting, according to Reuters.
He added: “Earlier this month, Federal Reserve Chairman Jerome Powell gave hawkish guidance on interest rate cuts during his press conference, prompting U.S. Treasury bond investors to reassess their positions.”
The yield on benchmark 10-year U.S. Treasury bonds hit its highest level in two and a half months on Monday, a trend that increases the opportunity cost of holding non-yielding assets, such as gold.
Analysts widely expect the Federal Reserve to cut interest rates this week, accompanied by signals reflecting tighter conditions for any further easing over the next year.
Data released last week showed that the US personal consumption expenditures price index, the Federal Reserve's preferred inflation gauge, came in line with expectations, while consumer confidence improved in December. Private-sector employment recorded its largest decline in more than two and a half years, while jobless claims fell to their lowest level in three years.
The CME Group’s FedWatch tool shows that markets are currently pricing in an 87% probability of a quarter-point cut in US interest rates at the December 9-10 meeting, compared with 90% on Monday.
Non-yielding assets, such as gold, typically rise during times of interest rate cuts.
As for other precious metals, silver settled at $58.10 an ounce after hitting a record high of $59.32 on Friday, while platinum rose 0.5% to $1,650.20 and palladium gained 0.4% to $1,471.25.
