Gold dropped on Wednesday as a stronger dollar made the metal pricier for overseas buyers, extending a six-week pullback from July's rally. Traders are now waiting on minutes from the Federal Reserve's September meeting for clues on the rate path, with several officials already downplaying the chance of an October move.
Spot gold fell 1.8% to $4,087.43 by 09:10 ET on Wednesday, while gold futures dipped 1.8% to $4,113.76. A stronger dollar can dent gold because it makes the metal more expensive for buyers holding other currencies.
Dollar strength pressures bullion
The U.S. dollar index firmed 0.4% to 102.26, tracking the greenback against a basket of peer currencies. David Morrison, Senior Market Analyst at Trade Nation, said the move was "yet another slap in the face for the bulls", adding to their frustration over the past six weeks or so.
That followed gold's month-long 17% rally off $4,000 at the end of July, which now appears to be unwinding.
Fed minutes in focus
Traders are looking ahead to minutes from the Fed's September meeting, when the central bank raised interest rates for the first time since 2023. Official projections also hinted at more rate rises before year-end, as policymakers try to corral inflation that has hovered well above the Fed's 2% target for months, driven largely by an energy price jump tied to the Iran war.
Still, expectations have faded that the Fed will deliver another rate hike at its meeting this month. Several Fed officials have downplayed the urgency of an October move, and recent employment data came in softer than anticipated, likely keeping rate-setters wary of tightening policy too fast. The rate outlook matters for gold because elevated borrowing costs raise the opportunity cost of holding a non-yielding asset like bullion.
Central banks keep buying
Despite the rate concerns, persistent central bank purchasing has continued to support gold, analysts at ING said in a note. World Gold Council data cited by ING found that central banks were net buyers in August, adding 39 tonnes, pushing year-to-date purchases to 170 tonnes.
Source: Commodities & Futures News
Trading involves risk.