Gold prices fell about 1.5% on Tuesday as a firmer U.S. dollar and rising expectations of Federal Reserve interest-rate hikes this year dented demand for the non-yielding metal, while investors also weighed progress in U.S.-Iran peace negotiations.

Spot gold fell 1.55% to $4,126.45 an ounce by 06:42 ET (10:42 GMT). U.S. Gold Futures slipped 1.63% to $4,142.10.

The yellow metal rose 0.7% in the previous session over optimism about U.S.-Iran peace talks.

The US Dollar Index held near a 13-month high touched last week.

The greenback has drawn support from a hawkish shift at last week’s Federal Reserve meeting, the first chaired by Kevin Warsh.

While policymakers left interest rates unchanged at 3.50%-3.75%, updated projections showed growing support for at least one rate increase before year-end. 

Futures markets are now pricing about a 90% probability of a rate hike in December, with some investors even anticipating more than one increase as policymakers remain focused on inflation risks. 

A stronger dollar makes gold more expensive for holders of other currencies, while higher interest rates reduce the appeal of bullion because it pays no interest.

Investor attention also remained on diplomatic efforts between Washington and Tehran. The U.S. has granted a 60-day sanctions waiver on some Iranian oil sales following initial talks in Switzerland, while U.S. officials described the discussions as constructive. 

While gold is traditionally viewed as a safe-haven asset during periods of geopolitical turmoil, investors have increasingly focused on the inflationary consequences of the Iran conflict.

The war drove oil prices sharply higher earlier this year, raising concerns that energy-driven inflation could force central banks to maintain restrictive monetary policy for longer.

Investors also await U.S. Personal Consumption Expenditures (PCE) inflation data due on Thursday, the Fed’s preferred price gauge.

Among other precious metals, silver prices slipped 4.3% to $62.29 per ounce, while platinum fell 2.6% to $1,639.60/oz.

Benchmark Copper Futures on the London Metal Exchange dipped 1.2% to $13,486.33 a ton, while U.S.Copper Futures declined 2.3% to $6.22 a pound.