Gold prices fell on Wednesday, ending a five-session winning streak, as the dollar rose after minutes from the Federal Reserve’s May meeting revealed that most members thought half-percentage-point rate increases would be reasonable in June and July.
As of 4:22 p.m. ET, spot gold was down 0.7 percent at $1,853.73 per ounce. Gold futures in the United States fell 0.7 percent to $1,852.50.
After touching its lowest level in a month on Tuesday, the dollar rebounded 0.3 percent. Gold becomes more expensive for foreign buyers as the currency strengthens.
According to the minutes of the May 3-4 policy meeting, all participants backed the Fed’s 50 basis point rate hike this month to battle inflation, which they felt had become a critical danger to the economy’s performance and was at risk of escalating without central bank intervention.
“The market’s focus is on the Fed’s rate-hike plan… If the minutes indicate a couple more rate hikes, gold may suffer. “However, if the Fed adopts a cautious tone, gold would benefit,” said Edward Moya, senior analyst at OANDA, ahead of the release of the minutes.
Even while gold is frequently thought of as an inflation hedge, rate hikes tend to raise bond yields, increasing the opportunity cost of keeping zero-yield bullion.
Headlong rate hikes, according to Atlanta Fed President Raphael Bostic, could cause “substantial economic upheaval.”
Meanwhile, Christine Lagarde, the president of the European Central Bank, has secured support for her proposal to hike rates out of negative territory this summer.