Gold eases as traders cement bets for higher for longer interest rates

Gold prices edged lower on Tuesday as markets factored in more restrictive monetary policy from the US Federal Reserve this year, while traders also kept close tabs on the Middle East conflict. Spot gold was down 0.3% at $4,332.34 per ounce by 9:25 a.m. ET (1325 GMT). US gold futures fell 0.3% to $4,370.40. "The problem remains that despite oil trending down somewhat, the market is continuing to robustly price Fed hikes...over the last few days, we've had a bit of strength on the US dollar side, and that's typically a negative for gold," said Bart Melek, global head of commodity strategy at TD Securities. Traders see a 90% chance of a rate hike in December, compared to 80% last week, according to the CME FedWatch Tool. Markets focused on monetary policy tightening as St. Louis Fed President Alberto Musalem and Chicago Fed President Austan Goolsbee signaled the need for further rate hikes to lower inflation stemming from strong demand and rising energy prices. This comes after the Fed raised interest rates last week and Chair Kevin Warsh flagged more hikes to come in the months ahead. Since the US-Israeli war on Iran broke out in late February, higher energy prices have stoked inflation concerns, forcing central banks around the world to adopt restrictive policy stances. This, in turn, has pressured gold prices, which have shed over 22% since hitting an all-time high of $5,594.82/oz in January. Although bullion is traditionally considered an inflation hedge, it loses its appeal to yield-bearing assets in a high-interest-rate environment. Oil prices fell to a two-week low on Tuesday as prospects for Gulf supplies improved, with Iran signaling it could reopen the Strait of Hormuz within seven days and Saudi Arabia set to resume exports from the port of Yanbu. Spot silver fell 0.4% to $65.76, platinum climbed 1.4% to $1,822.58, and palladium added 0.9% to $1,312.16.