Gold backs off historic highs ahead of Fed minutes

Gold prices fell in European trade on Wednesday, on track for the second loss in a row, and moving off record highs on profit-taking, as the dollar gained ground against major rivals.

Traders now await the Federal Reserve’s last meeting minutes, which are expected to include fresh clues on the timing of US rate cuts.

The Price 

Gold prices fell 0.4% to $2410 an ounce, with a session-high at $2426. 

On Tuesday, the precious metal lost 0.25%, the first loss in three days away from a record high at $2450. 

The Dollar

The dollar index rose 0.15% on Wednesday, extending gains for the fifth straight session against a basket of major rivals.

A stronger dollar makes greenback-denominated gold futures costlier to holders of other currencies. 

The gains came after bullish remarks by Fed officials, which boosted US 10-year treasury yields. 

Fed official Christopher Waller said on Tuesday that he needs to see a few months of good inflation data before taking the step of supporting policy easing.

US Rates 

The odds of a Fed 0.25% rate cut in July stood at 18%, and stood at 61% for September. 

According to the Fedwatch tool, investors are expecting two 0.25% rate cuts this year by the FEd. 

The Fed

The Federal Reserve is scheduled to release the minutes of its May meeting later today, at which it maintained interest rates unchanged at below 5.5%.

The Fed back then said it doesn’t expect to cut interest rates until more confidence is gained about inflation moving towards the 2% target. 

Fed Chair Jerome Powell said back then that he expects monetary policy to remain restrictive for sometime until inflation is confidently subdued. 

However, he doesn’t expect the next step in monetary policy to be a rate hike. 

Gold Outlook  

RGO Futures’ analysts believe gold prices could rise towards $2500 an ounce in the short term, however there's a risk that momentum could be lost. 

The SPDR

Gold holdings at the SPDR Gold Trust remained flat yesterday at 838.54 tonnes, the highest since February 14.