Gold falls as stronger dollar and Fed outlook weigh on prices

London: Gold prices edged lower on Thursday as a stronger U.S. dollar and hawkish signals from the Federal Reserve reduced demand for the non-yielding precious metal. Spot gold fell 0.3 percent to $4,245.99 per ounce, extending losses after a 1.7 percent drop in the previous session. U.S. gold futures also declined, falling 2.6 percent to $4,265.50. Dollar strength pressures gold The decline in gold prices coincided with a 0.7 percent rise in the U.S. dollar index, making dollar-denominated commodities more expensive for international buyers and dampening demand. Fed outlook impacts market sentiment The Federal Reserve held interest rates steady in its latest meeting but signalled the possibility of tightening monetary policy later this year, citing persistent inflation above its target. Fed Chair Kevin Warsh indicated that the central bank expects further economic assessments, with markets now pricing in a high probability of a rate hike by December. Analysts said the outlook is creating downward pressure on gold prices. “The hawkish Fed leaves gold with a greater bias towards further declines rather than significant gains in the near term,” said Han Tan, chief market analyst at Bybit. Weak investment demand Market analysts also pointed to weaker investment demand for gold, with outflows from exchange-traded funds and reduced speculative positioning. However, physical demand, particularly from China, along with continued central bank purchases, is helping to provide some support to the market. Geopolitical focus remains Investors are also monitoring developments in the Middle East following a U.S.-Iran agreement aimed at ending hostilities. While the deal has eased tensions, uncertainty remains, particularly after warnings that military action could resume if commitments are not met. Other precious metals decline Broader weakness was seen across precious metals. Silver fell 1 percent to $67.29 per ounce Platinum dropped 2.1 percent to $1,701.02 Palladium declined 2.6 percent to $1,277.79 Market outlook With interest rate expectations and currency movements dominating sentiment, analysts expect gold prices to remain volatile. Future price movements are likely to be influenced by upcoming U.S. economic data, central bank policy decisions, and geopolitical developments, particularly in key energy regions.