Gold prices traded lower during the Asian session on Wednesday, extending declines to two-week lows as investors increased bets that the United States Federal Reserve will keep monetary policy tighter for longer.
By 3:50 pm AEST (5:50 am GMT), spot gold was down 0.9% at US$4,074.22 an ounce.
The decline came as expectations of further interest rate increases pushed the U.S. dollar to its highest level since May 2025, weighing on demand for non-yielding assets such as gold.
Gold's weakness persisted despite a continued fall in crude oil prices, which dropped to four-month lows as shipping traffic through the Strait of Hormuz resumed and concerns about supply disruptions eased.
Additional pressure on oil prices came after the U.S. Treasury Department issued a temporary 60-day sanctions waiver allowing the production, delivery and sale of Iranian crude oil, petroleum and petrochemical products.
The move has helped ease global supply concerns and reduce some of the inflationary pressure stemming from higher energy costs.
However, investors have significantly increased expectations that the Federal Reserve will raise borrowing costs by at least 25 basis points during 2026 following the central bank's hawkish messaging last week.
Adding to those expectations, new Fed Chair Kevin Warsh placed a strong emphasis on price stability during his post-meeting press conference, signalling that policymakers may be reluctant to cut interest rates quickly even if economic growth slows.
Traders are now turning their attention to the U.S. Personal Consumption Expenditures (PCE) Price Index due on Thursday, which is expected to provide fresh clues on inflation and the future path of Federal Reserve policy.
