Dollar climbs ahead of Fed minutes; euro slides towards 17-month lows

Gold prices slipped on Wednesday, falling approximately 1.20% as the US Dollar and US Treasury yields rebounded ahead of the Federal Reserve's minutes release. The precious metal hovered around $4,114 at the time of writing, awaiting the Federal Open Market Committee's (FOMC) September policy meeting minutes at 18:00 GMT. The US Dollar Index (DXY), which measures the Greenback's value against six major currencies, stood at around 102.30, near a level last seen in April 2025.

The benchmark 10-year US Treasury yield climbed to approximately 5.324%, nearing Monday's peak of 5.349%, its highest level since 2002. Factors such as oil-driven inflation from the Middle East conflict, concerns over rising government debt and fiscal deficits, and a robust US growth outlook contributed to the rise in borrowing costs.

A stronger US Dollar and higher Treasury yields make gold more expensive for buyers in other currencies, increasing the opportunity cost of holding non-yielding assets like gold. Despite Wednesday's decline, gold remains in a weekly consolidation range, and traders are closely watching the Fed's meeting minutes for clues on future interest rate decisions.

The Federal Reserve has signaled a potential pause in rate hikes following September's meeting, with a 25-basis-point increase in September expected. However, persistent inflation risks, driven by high energy prices, may lead to another rate hike in December. Central banks continue to accumulate gold as a hedge against currency depreciation and inflation, with China leading net purchases in August, adding 39 tonnes to its reserves.

The yellow metal is inversely correlated with the US Dollar and Treasury yields, rising when the Dollar weakens and falling when interest rates rise. The price of gold is influenced by various factors, including geopolitical tensions and economic data, with investors often turning to the metal during times of uncertainty.