By Bharat Gautam

(Reuters) – Gold prices fell on Tuesday to their lowest level since February mid-February. This was due to a rising dollar and an impending interest rate rise by the U.S. Federal Reserve. Bullion is no longer an attractive inflation hedge.

At 0510 GMT, the price of an ounce was $1,858.10, down 0.3% On Monday, Bullion dropped more than 2 percent to the lowest level since February 16, when it was at $1858.10 per ounce. This is due to the strengthening dollar and stronger yields thanks in part to increased expectations for quicker rate increases by the U.S. central banks.

The U.S. was also lower at $1857.20 by 0.3%

We have short-term risks to gold, and our target range is $1,810-1,790. The pressure from rising interest rates will be a problem for the dollar,” said Michael McCarthy (chief strategy officer, Tiger Brokers Australia).

Dollar highs remained close to 20 years, which made greenback-priced metal less appealing for foreign buyers. Meanwhile, benchmark 10-year Treasury yields hit 3% Monday for the first-time since December 2018. This psychological landmark is a significant milestone.

Federal Open Market Committee, the U.S. central bank’s interest rate meeting will start later today. It is likely to raise borrowing costs by half a percentage point on Wednesday when it makes its announcement.

In March, the Fed increased its policy interest rate 25 basis points. It is likely that it will soon start trimming its assets as part of its efforts to tighten pandemic-era Monetary Policy and control soaring inflation.

The opportunity cost to hold zero-yield bullion is increased by higher short-term U.S. rates of interest and bond yields.

After a significant shift Monday by Germany (Russia’s largest energy customer), the European Union prepared sanctions against Russian oil sales in response to its invasion of Ukraine.

Bullion is considered a valuable reserve of value in economic or political crisis times.

Spot Silver fell 0.5% at $22.52 per Ounce, while platinum dropped 0.1% to $934.94. Palladium gained 0.8% at $2,234.12.