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PRECIOUS-Gold falls as dollar strengthens ahead of Fed minutes

  • BY Reuters
  • 10:40 AM ET 05/25/2022
       * May FOMC policy meeting minutes due at 1800 GMT
    * Dollar index        up 0.4%

 (Updates prices)
    By Ashitha Shivaprasad
    May 25 (Reuters) - Gold prices dropped more than 1% on
Wednesday and were on track to snap a five-session winning
streak, weighed by a rebound in the dollar ahead of the release
of the U.S. central bank's minutes from its May meeting.
    Spot gold        was down 1.1% at $1,846.27 per ounce as of
12:06 a.m. ET (1606 GMT). U.S. gold futures        dropped 1.2%
to $1,844.00.
    The dollar        gained 0.4%, after hitting its lowest
level in a month on Tuesday. A stronger dollar makes gold more
expensive for overseas buyers.
    "The market is fixated on the Fed's path for rate hikes ...
If the minutes signal couple more rate hikes, it could hurt
gold. But if the Fed takes a cautious tone that would be good
news for gold," said Edward Moya, senior analyst with OANDA.
    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. ET (1800 GMT).
    Investors expect 50-basis-point rate hikes in June and July.
The Fed Chair Jerome Powell has promised to raise rates as high
as needed 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
    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 1% to $21.86 per ounce, platinum
       shed 0.9% to $945.52 and palladium        was down 0.2%
at $2,003.29.
    "Platinum and palladium are being kept in check by the
ongoing problems in the automotive industry, which is slowing
demand for these precious metals," Commerzbank analysts said in
a note.

 (Reporting by Ashitha Shivaprasad in Bengaluru;
Editing by Vinay Dwivedi and Amy Caren Daniel)

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