Gold fell 1% on Tuesday as renewed expectations that the Federal Reserve will raise interest rates for the first time in nearly a decade lifted the dollar, while weakness in other commodities also pulled the market lower.
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Gold rallied last week after the Fed left rates at ultra-low levels, keeping a lid on the opportunity cost of holding non-yielding bullion. It failed to maintain those gains after a Fed official emphasized that a rise had only been postponed.
Atlanta Fed President Dennis Lockhart said on Monday that last week's decision was largely a "risk management" exercise, and that he still expects an increase later this year. St. Louis Fed President James Bullard said the central bank could lift rates at its October meeting.
The dollar touched an almost two-week high against a basket of major currencies after the comments revived expectations that U.S. interest rates will still be hiked later this year.
"We're still in a situation where investors are going to wait and see when a hike will happen," Capital Economics analyst Simona Gambarini said. "There's going to be a bit of volatility around precious metals until the Fed eventually does hike rates."
Spot gold was down 0.9% at $1,123.41 an ounce at 1358 GMT, while U.S. gold futures for December delivery were down $9.80 an ounce at $1,123.00.
Commodities came under heavy pressure as assets seen as higher risk were sold off. European shares fell 2.3% on Tuesday, while oil prices slipped more than 1 percent and London copper struck a two-week low.
Gold outperformed the more industrial precious metals, with platinum down 2.7% at $939.99 an ounce, palladium down 2.1% at $598.15 an ounce, and silver down 2.5% at $14.78 an ounce.
Earlier platinum hit its lowest since January 2009 at $934.
"Gold still has these safe-haven characteristics on a day like today, when everything that has a risk tag on it is just going down - equities are going down, cyclical commodities are going down," Julius Baer analyst Carsten Menke said. "That's when gold starts to shine, at least a little bit."
The world's largest gold-backed exchange-traded fund, SPDR Gold Shares, said its holdings fell 0.53% to 674.61 tonnes on Monday, the first decline in nearly two weeks.
Switzerland's gold exports to China and Hong Kong combined nearly doubled month-on-month in August, data from the Swiss customs bureau showed.
By Marcy Nicholson and Jan Harvey
(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Pravin Char and David Evans)