(Bloomberg) -- Gold kicked off a pivotal week with fresh declines as investors brace for a Federal Reserve rates decision that risks putting more pressure on the precious metal.
Bullion has slumped over the past month in the face of the dollar’s relentless gains, and the Fed’s rate-hike decision on Wednesday will be key for what happens next. A bigger-than-expected increase could fuel the greenback’s rally and further erode the appeal of an asset that offers no interest.
Fed Chair Jerome Powell and his colleagues meet from Tuesday to set interest rates with expectations for a super-sized rate increase of 75 basis points. Last week’s hot inflation data, combined with a strong labor market and retail sales numbers, prompted some to forecast a full percentage point hike.
“Rising geopolitical and economic risks are doing little to entice haven buying, with the US dollar still the asset of choice,” Australia & New Zealand Banking Group analysts wrote in a note. Gold sank to a two-year low last week after plunging below the key threshold of $1,700 an ounce.
Meanwhile, the European Central Bank is also expected to continue lifting rates “in October and beyond,” said Bundesbank President Joachim Nagel.
Spot gold fell 0.4% to $1,667.61 an ounce at 6:54 a.m. in London. The Bloomberg Dollar Spot Index rose 0.2%. Palladium, silver and platinum all retreated.