Gold fell on Wednesday, extending the previous session’s slide, as the dollar strengthened ahead of minutes from the Federal Reserve’s latest policy meeting, which will be scrutinised for clues on the US rate outlook.

The metal slid sharply on Tuesday, posting its biggest one-day loss since April 30, as the dollar rebounded from its weakest run against the euro in four years.

Spot gold was down 0.1 per cent at $1,206.05 an ounce at 0925 GMT, while US gold futures for June delivery were down 80 cents at $1,205.90. Prices fell 1.5 per cent on Tuesday after hitting a three-month high of $1,232.20 on Monday.

“Gold’s weakness is mainly related to the dollar,’’ Commerzbank analyst Daniel Briesemann said.

“The upmove last week was driven partly by speculation, the CFTC data show, so maybe these short-term oriented market players are (also) taking the higher prices as an excuse for profit-taking.’’

“The $1,200 mark seems to be hard for gold to overcome,’’ he added. “I wouldn’t be surprised to see prices falling back below this level.’’

Dollar at 3-week high

The dollar scaled a three-week high against the euro on Wednesday, with the single currency extending losses after a Greek official said the country may not make an upcoming repayment to the International Monetary Fund.

Some analysts said there is a broad feeling the dollar is moving back onto the offensive again after a month-long pullback. There were mixed views about the likely message from the Fed in minutes from its latest meeting due later in the day.

Gold prices have struggled to break out of a $1,175-$1,125 an ounce range since mid-February, hamstrung by uncertainty over the timing of an expected U.S. interest rate rise.

Rising rates tend to weigh on gold, as they increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

A drop in the holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, to a four-month low of 718.24 tonnes on Monday also pointed to cautious investor sentiment.

Appetite for physical gold was lacklustre in Asia, dealers said. “I think traders had high hopes that we may see some pent up physical demand unleashed today that had been non-existent above $1210, yet it never eventuated,’’ MKS said in a note.

Among other precious metals, silver was up 0.2 per cent at $17.07 an ounce after falling 3.6 per cent on Tuesday, its biggest one-day slide in three months.

Platinum was down 0.2 per cent at $1,151 an ounce and palladium was up 0.9 per cent at $782.50 an ounce.

Related Topics
comment COMMENT NOW