Gold eases on firmer dollar ahead of Fed decision

"We're seeing gold basically digest within Friday's range (after) the big drop last week," said Ilya Spivak, head of global macro at Tastylive. "If we can get a break through $3,900, we're in for a pretty significant further decline, maybe to test the $3,800 area." Bullion dropped below the $4,000 mark for the first time since mid-July last week, and posted a weekly fall of 4%, its worst in about four months, as higher energy prices fueled inflation concerns and reinforced US rate hike expectations. [O/R]

Federal Reserve policymakers have telegraphed they will not raise US short-term borrowing costs again this week, but with inflation concerns still front and center, investors doubt a pause will last for long. Markets await the Fed's policy decision on Wednesday along with the Personal Consumption Expenditures data on Thursday, the central bank's preferred gauge as it targets a 2% inflation rate. Traders are pricing in about an 11% chance of a rate hike this week and an 80% chance of a December increase, according to the CME's FedWatch Tool.

While gold is often seen as a hedge against inflation, higher interest rates hurt its appeal as a non-yielding asset. On the geopolitical front, the Saudi-led coalition in Yemen said on Tuesday it intercepted and destroyed three ballistic missiles and drones launched by the Houthis towards two regions of Saudi Arabia, as the conflict between the kingdom and the Iran-aligned group intensifies. Among other metals, spot silver slid 2.1% to $52.77 per ounce, platinum lost 2.1% to $1,495.62 and palladium dropped 2.5% to $1,023.47. (Reporting by Sukanya Mitra in Bengaluru: Editing by Sherry Jacob-Phillips, Ronojoy Mazumdar and Mrigank Dhaniwala)