Gold Declines as Strong Dollar, Fed Outlook Outweigh War Premium

Gold declined, pressured by strength in the dollar and the prospect of less monetary easing as the war in the Middle East entered a sixth day with no sign of resolution.

Bullion fell as much as 1.7% in US trading as inflation worries stemming from higher energy prices lifted the greenback and Treasury yields. High inflation may prompt the Federal Reserve to hold rates steady or even hike them to contain price pressure. Swaps traders are currently pricing in about 35 basis points of rate cuts by year-end, compared with 60 basis points at the end of last week. That’s negative for bullion as it pays no interest.