Investing.com - Gold prices fell to fresh two-and-a-half month lows on Tuesday, pressured lower by a stronger dollar ahead of the Federal Reserve’s latest policy decision and the U.S. jobs report later this week.
Gold futures for June delivery on the Comex division of the New York Mercantile Exchange were down $9.20 or 0.7% to $1,310.00 a troy ounce by 04:21 AM ET (08:21 AM GMT), the lowest level since March 19.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was up 0.28% to a four-month high of 91.89.
The index rose 2% in April after the yield on 10-year U.S. Treasury notes rose above the psychologically important 3% level for the first time in four years.
A stronger U.S. currency makes dollar denominated gold more expensive for overseas buyers.
The dollar was boosted on Monday after the Commerce Department said annual inflation hit the Federal Reserve’s 2% target for the first time in over a year in March.
Rising inflation would be a catalyst to push the Fed toward raising interest rates at a faster pace than currently expected. Fed officials projected three increases in 2018 at their meetings December and March.
The Fed is due to conclude its two-day meeting on Wednesday and is not expected to take any action on interest rates. The majority of economists believe the next move higher will come its meeting in June.
Expectations for a faster pace of rate hikes tend to be bearish for gold, which struggles to compete with yield bearing assets when interest rates rise.
Markets are also looking ahead to Friday’s U.S. employment report for April, which could provide further signs of strength in the world's largest economy.
In other precious metal trade, silver futures were down 0.74% to $16.27 a troy ounce, while platinum futures were down 0.45% to $900.30.
Among base metals, copper futures shed 1.17% to trade at $3.038 a pound.