London - 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 percent at $1,206.05 an ounce at 09h25 GMT, while US gold futures for June delivery were down 80 cents at $1,205.90. Prices fell 1.5 percent 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 up move 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.”
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 US 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 holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, to a four-month low of 718.24 tons 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 percent at $17.07 an ounce after falling 3.6 percent on Tuesday, its biggest one-day slide in three months. Platinum was down 0.2 percent at $1,151 an ounce and palladium was up 0.9 percent at $782.50 an ounce.
Reuters