Gold prices fell by as much as 1% on Tuesday, trading near $4,040 an ounce, as investors awaited the Federal Reserve’s interest-rate decision on Wednesday. The decline erased modest gains from the previous session, with futures on the Comex closing 0.94% lower at $4,038.7 per troy ounce, according to Valor Econômico. The metal has fallen nearly 30% from its late-January record high and has been trading in a $4,000–$4,200 range, largely due to expectations of tighter US monetary policy, the Brazilian outlet reported.

Traders are pricing in roughly a 40% probability of a quarter-point rate increase this week, an unusually high degree of uncertainty so close to the announcement, Gulf News wrote, citing interest-rate swap data. Citadel Securities said it expects a hike, arguing it would strengthen Fed Chair Kevin Warsh's anti-inflation credibility, according to La República. Conversely, 62% of traders expect rates to remain unchanged, per CME's FedWatch Tool as cited by Khabar Online. Donald Trump on Monday called on the Fed to cut rates, saying the US should have the world's lowest interest rates, the Iranian outlet added.

A pause in hostilities between the US and Iran has helped calm inflation fears. Trump said on Monday that both countries had resumed talks to end the five-month conflict, with air strikes paused in recent days, according to multiple sources. A fragile truce also contributed to a decline in oil prices, though crude above $80 a barrel continues to complicate the inflation outlook and could support higher interest rates, according to the Gulf News article's narrative. Gold has remained near the $4,000 support level since late June, helped by buying on dips; bullion-backed exchange-traded funds increased holdings for five consecutive days, the longest streak since May, La República noted.

If the Fed keeps rates on hold and signals a pause, gold could recover. Commerzbank cut its year-end forecast to $4,500 per ounce from $4,800 but said market expectations for tighter policy are exaggerated, predicting rates will stay unchanged through year-end, Valor Econômico reported. The bank projects gold at $5,000 by end-2027 if the Fed resumes cuts next year. Ilya Spivak, head of global macro at TST Live, told Khabar Online that gold is range-bound between $3,950 and $4,200, and that if the Fed does not pave the way for a September hike, gold could rise above $4,200. The Fed's two-day policy meeting concludes on Wednesday, with markets closely watching for signals on the rate path.