Gold was skidding lower Wednesday, and set to snap a four-day rally, amid a broad deleveraging of financial markets that saw stocks, bonds and haven metals in the crosshairs of selling pressure.
Investors were widely awaiting minutes from the Federal Reserve’s most recent policy meeting in April, due at 2 p.m. Eastern Time, for clues on how the central bank will address evidence of pricing pressures building in the economy, which officials have so far described as transitory.
June gold
GCM21,
-0.04%
GC00,
-0.04%
was trading $15.10, or 0.8%, lower at $1,852.90 an ounce. The decline follows a gain of less than 0.1% for the precious metal on Tuesday, which was enough to mark the most-active contract’s highest finish since Jan. 7, FactSet data show.
“A sense of caution is prevailing ahead of the release. The minutes are expected to reiterate the Fed’s dovish stance, highlighting any rise in inflation as transitory,” wrote Sophie Griffiths, market analyst at Oanda, in a note.
Buying in gold had been supported by waning appetite for risk, weakness in the U.S. dollar, represented by the popular ICE U.S. Dollar Index
DXY,
+0.22%
hitting a nearly three-month low.
On Wednesday, the buck was regaining some momentum amid fears of inflation that were running high. A stronger buck can hurt appetite for dollar-pegged assets like gold.
“Dovish minutes could propel the precious metal higher. Until then, dollar dynamics are expected to drive movement in gold,” Griffiths wrote.
Precious metal investors fear that out-of-control inflation could prompt the Fed to rapidly lift benchmark interest rates — a move that would weigh on bullion that doesn’t offer a coupon.
“Buyers are moving to gold, in response to a combination of factors. The two most notable are surely the weakness of the greenback, with the dollar index at its lowest for 3 months, and inflation fears,” wrote Carlo Alberto De Casa, chief analyst at ActivTrades.
“Moreover, risk-on has slowed down, with a moderate shift to risk-off assets such as gold,” he said.
Meanwhile, July silver
SIN21,
-1.83%
shed 57 cents, or 2%, to $27.46 an ounce, following a 0.2% rise on Tuesday.
