Title: Gold prices drop on dollar strength; Fed's minutes in focus

May 25, 2022 03:20AM ET

By: AnalysisWatch

Gold prices fell on Wednesday as the dollar strengthened, as investors awaited the minutes of the US Federal Reserve's May policy meeting for clues on the size of the central bank's upcoming interest rate hikes.

Spot gold fell 0.5 percent to $1,857.39 an ounce at 0636 GMT, after rising to its highest since 9 May at $1,869.49 on Tuesday. US gold futures also fell 0.5 percent to $1,856.00.

The dollar index strengthened after hitting its lowest level in a month in the previous session, making the green metal more expensive for buyers holding other currencies.

The FOMC is scheduled to release the minutes of its 3-4 May policy meeting at 6pm GMT.

However, "investors are grappling with the assessment of the inflation landing path now that peak inflation is behind us. The question on the market's mind is how long the normalisation will take, and this uncertainty is helping gold

While gold is seen as a hedge against inflation, rising US short-term interest rates increase the opportunity cost of holding unprofitable bullion.

As the Federal Reserve intensifies its fight against 40-year high inflation with what is expected to be a series of sharp interest rate hikes, one US central banker issued a note of caution, warning that too-abrupt rate hikes could create 'significant economic dislocation'.

According to Reuters technical analyst Wang Tao, spot gold could stabilize around support at $1,856 an ounce and retest resistance at $1,867.

Spot silver fell 0.6 percent to $21.95 an ounce, platinum fell 0.7 percent to $947.49, and palladium rose 0.5 percent to $2,015.99.