The dollar index scaled a fresh two-decade peak, making greenback-priced bullion more expensive for buyers holding other currencies. Benchmark U.S. 10-year Treasury yields rose to 4% for the first time since 2010.
Gold is seen as a hedge against inflation and economic uncertainties but aggressive rate hikes by Fed have dented non-interest yielding bullion's appeal and pushed the dollar to multi-year highs.
Top Fed officials, including Chicago Fed President Charles Evans, St. Louis Fed President James Bullard and Minneapolis Federal Reserve Bank President Neel Kashkari, recently echoed the central bank's pledge to focus on tackling soaring inflation.
Gold continues to slide lower on higher US real yields while Brent crude has also fallen sharply as aggressive central bank tightening is likely to hurt global demand,says IFA Global in a note.
Despite the sharp dip in gold prices, investor sentiment remained weak. Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.28% to 940.86 tonnes on Tuesday from 943.47 tonnes on Monday.
Domestic brokerage Geojit said that if gold breaches the key level of $1600 there could be more selling pressure and silver needs to break above $20 to turn prices higher.
Meanwhile, amid the current risk-off sentiment, global shares sank to two-year lows today as surging borrowing costs and a worsening energy crisis intensified fears that the world could tip into recession, which sent investors dashing for the safe-haven dollar. Central banks around the world have jacked up interest rates in the last week and said they would do whatever it takes to fight red-hot inflation. (With Agency Inputs)
