Gold extended its losses on Tuesday after holding steady during the early hours of trading, as the dollar resumed its climb to further diminish bullion’s safe-haven appeal.

Spot gold fell by 0.3% to $1,813.11 per ounce by 1:30 p.m. ET, while US gold futures had a larger decline of 0.9%, trading at $1,814.20 per ounce in New York.

[Click here for an interactive chart of gold prices]

Meanwhile the dollar edged higher against a basket of currencies to scale a fresh two-decade high, making gold expensive for overseas buyers.

Also hurting gold’s outlook is the latest US producer price data, which exceeded market expectations, reinforcing concerns of the Federal Reserve’s aggressive policy stance to combat inflation.

“The main thing driving gold right now is anticipation of a very aggressive Fed when it comes to rates tomorrow, given the recent inflation data,” Bob Haberkorn, senior market strategist at RJO Futures, told Reuters.

Investors are now increasingly betting that Fed officials will consider the biggest interest-rate increase since 1994 when they meet this week. JPMorgan and Wells Fargo are among a number of banks that are expecting the rate hike to reach 75 basis points. That damps demand for precious metals, which bear no interest.

“Gold competes against the bond markets as a safe haven,” Haberkorn said in a separate phone interview with Bloomberg. “A potential rate hike of 75 to 100 basis points by the Fed might make the bond market a little more attractive to safe haven buyers than the gold market would normally be.”

Still, there some underlying support for gold as a haven asset as recession risks loom on the back of aggressive monetary-policy tightening.

“The successful or unsuccessful race to combat inflation before the economy begins to suffer has become a major theme and one that will determine the ultimate direction of gold,” Saxo Bank analyst Ole Hansen wrote in a note.

(With files from Bloomberg and Reuters)