Gold Slips as Stronger Dollar Weighs; Focus on Fed Minutes and Gulf Tensions

Gold prices fell for a second consecutive session on Tuesday, pressured by a strengthening U.S. dollar as investors awaited key economic data and monitored geopolitical developments. Spot gold decreased by 0.8% to $4,129.36 per ounce by 09:18 GMT, following a more than 2% surge the previous week.

The U.S. dollar's rise against a basket of currencies made dollar-denominated gold more expensive for international buyers. Analysts suggest the current price movement is more of a consolidation phase rather than a significant reversal, with traders adopting a cautious stance ahead of the Federal Reserve's meeting minutes, due Wednesday. These minutes are expected to provide insights into the Fed's views on inflation, labor market conditions, and any internal policy divergences.

Market participants are currently pricing in approximately a 58% chance of a U.S. interest rate hike in September, according to the CME FedWatch tool. Geopolitical tensions in the Gulf also remain a focal point. Renewed threats of military action against Iran by former President Trump, coupled with Iran's foreign minister stating that peace deal negotiations would halt unless Washington abandons its threats, have contributed to nervousness among traders.

Rising crude oil prices, fueled by concerns over the lack of progress in peace talks, have amplified inflation worries. This, in turn, bolsters expectations for sustained higher U.S. interest rates, which typically weighs on non-yielding assets like gold. Despite the broader market pressures, China's central bank maintained its gold buying streak, adding to its reserves for the 20th consecutive month in June. Meanwhile, Hong Kong launched a central clearing system for gold and revived dollar gold futures trading.

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Today's price action appears to be more of a consolidation than a significant reversal of last week's positive sentiment, with traders waiting for the release of the latest FOMC minutes on Wednesday before making more decisive moves.