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Gold fades to dollar's strength ahead of Fed minutes

25 May 2022 9:41 pm
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Mumbai, 25 May (Commoditiescontrol): Gold prices dropped 1 percent on Wednesday and were on track to snap a five-session winning streak, weighed down by a rebound in dollar ahead of the U.S. central bank's minutes from its May meeting.

Spot gold was down 0.9 percent at $1,849.62 per ounce. U.S. gold futures dropped 0.9 percent to $1,847.80.

The dollar was up 0.4 percent, after hitting its lowest level in a month on Tuesday. A stronger dollar makes gold expensive for overseas buyers.

The U.S. Federal Reserve is due to release the minutes from its May 3-4 Federal Open Market Committee policy meeting at 2 p.m. EDT (1800 GMT).

Investors expect 50-basis-point rate hikes in June and July, but Fed Chair Jerome Powell has promised to raise rates until there is evidence that inflation is dropping.

Even though gold is often seen as a hedge against inflation, rate hikes erode its appeal as they tend to lift bond yields, raising the opportunity cost of holding zero-yield bullion.

Atlanta Fed President Raphael Bostic on Tuesday warned that headlong rate hikes could create "significant economic dislocation."

Meanwhile, European Central Bank President Christine Lagarde gained key allies for her plan to raise rates out of negative territory this summer.

Spot silver fell 0.8 percent to $21.92 per ounce, platinum shed 0.4 percent to $950.48 and palladium steadied at $2,006.

(By Commoditiescontrol Bureau: +91-22-40015505)

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