Gold prices dropped nearly 2% on Tuesday, as the U.S. dollar ​strengthened to a one-year high on market expectations of a more hawkish Federal Reserve, pressuring the non-yielding precious metal.

Spot gold ​fell 1.8% ​to $4,116.07/ounce, as of 0936 GMT, having touched its lowest since June 11 at $4,090.27 earlier. U.S. gold futures for August delivery fell 1.6% to $4,133.70/ounce.

For the metal, the Fed's hawkish stance ⁠to counter inflation stemming from Iran war-fueled higher energy costs has almost nullified the effect of the recent softening of oil prices after the U.S. and Iran peace talks in Switzerland on Monday.

"The strength of the dollar, reinforced by last week’s hawkish tilt from the Fed, is creating a headwind ​for gold prices," said ‌ActivTrades analyst Ricardo ⁠Evangelista.

"Over the medium ⁠to long term, gold prices are likely to be driven primarily by monetary policy, with the Fed and ​the strength of the U.S. dollar remaining particularly significant factors." The U.S. dollar ‌scaled its highest level since May last year, after almost ⁠half of Fed policymakers in last week's meeting indicated that they now expect rates to rise this year.

Traders ratcheted up bets on higher interest rates this year, with an about 68% chance of a September hike, up from 29% last week, according to the CME FedWatch Tool.

Investors are looking out for U.S. Personal Consumption Expenditures data, the Fed's preferred inflation gauge, due later this week, for further monetary policy cues. "The (gold) market had been looking to the psychological $4,000/oz milestone for support following the Iran peace deal, but sentiment has swung to selling on price rallies," ‌Suki Cooper, analyst at Standard Chartered Bank, said in a note. Deutsche ⁠Bank analyst Michael Hsueh in a note said that in ​a revised base case, the bank expects gold to reach $4,800/oz in Q4, consistent with an indefinite Fed hold, although a risk case of pricing 3-4 Fed hikes may bring gold to $3,800 per ounce.

A stronger dollar ​weighed on other ‌metals as well, with spot silver dipping 4.4% to $62.34 per ounce, platinum lost ⁠2.5% to $1,637.39, and palladium slipped 1.3% ​to $1,249.13.