Why are gold prices falling today, and will it continue to drop or rise again?

Gold prices are falling over 1% on Wednesday. The precious metal is witnessing a decline as Federal Reserve signals bolstered rate hike expectations and led the US dollar to new heights. At 9:05 a.m. ET (1305 GMT), spot gold had dropped 1.1% to $4,304.89 per ounce. US gold futures for December delivery were also down 0.8% at $4,341.90.

Why are gold prices falling today?

Peter Grant, vice president and senior metals strategist at Zaner Metals, told Reuters, that gold is pressured by the higher dollar. "Post-FOMC Fed speak has been fairly hawkish. So the market is building in expectations of at least one more rate hike before the end of the year. And that's putting gold under pressure," added Grant.


The dollar, which is at a two-month high, is making greenback-priced bullion more expensive for holders of other currencies. Boston Fed President Susan Collins and Richmond Fed President Tom Barkin have voiced support for last week's rise in interest rates as inflation concerns grow.

Will gold continue to drop or rise again?

As per CME's FedWatch Tool, the traders expect a 53% chance of a rate hike in October and a 91% chance of another hike in coming December. The bullion are a usually inflation hedge.

Some Fed officials had also raised concerns about inflation. The officials feel the inflation is being driven by strong demand in the economy. The rise in interest rates can reduce the appeal of gold as investors move toward interest-bearing assets. The gold prices fall as oil prices rise and it is also brought down by fears of inflation and tighter monetary policy from central banks.