Gold price retreats as stocks steady, dollar index rebounds
London (Apr 6) Gold fell on Wednesday as a recovery in the dollar prompted some to cash in gains after Tuesday's 1.8 percent rally, though price moves were muted as traders awaited the minutes of the Federal Reserve's last policy meeting.
The minutes, due to be published at 1800 GMT, will be scrutinised for clues about the outlook for U.S. monetary policy, as well as any signs of dissent over the central bank's decision to leave interest rates on hold at its March meeting.
Gold is sensitive to any increase in U.S. rates, as it would lift the opportunity cost of holding non-interest bearing metal. It posted its biggest quarterly rise in nearly 30 years in the first three months of 2016 as expectations for rate rises faded.
Gold rose 1.8 percent on Tuesday as equity markets sold off, fuelling interest in the metal as an alternative asset, but it has since declined as stocks steadied in Europe.
Spot gold was down 0.4 percent at $1,225.41 an ounce at 0931 GMT, while U.S. gold futures for June delivery were down $2.40 an ounce at $1,227.20.
"The precious metal has eased off today as investors have their focus back towards the equity markets," Ava Trade's chief market analyst Naeem Aslam said. "However, what is significant is the upcoming FOMC meeting minutes today."
"The FOMC committee needs to show solidarity with respect to a rate hike and as long as we are lacking that, their message will be vague and spawn only more volatility."
U.S. Fed Chair Janet Yellen sparked a rally in gold late last month after saying the central bank should remain cautious about any further interest rate rises.
However, recent hawkish comments have capped gains in the market. Boston Federal Reserve President Eric Rosengren and Chicago Fed President Charles Evans indicated this week that the market view about rate rises was pessimistic.
"While differences amongst policymakers are quite normal behind the scenes, seeing them played out in so public a manner does run the risk of muddying the message," CMC Markets said in a note.
Holdings of the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, fell 0.28 tonnes to 815.44 tonnes on Tuesday, data from the fund showed. It reported its first weekly outflow this year last week.
Among other precious metals, silver was flat at $15.12 an ounce, while platinum was up 0.4 percent at $954.05 an ounce and palladium was up 1.5 percent at $551.75 an ounce.