Investing.com - Gold prices edged lower in European trade on Wednesday, reversing overnight gains as market players looked ahead to minutes of the Federal Reserve’s July policy meeting, which many feared could be more hawkish than the statement.
Gold for December delivery on the Comex division of the New York Mercantile Exchange shed $9.95, or 0.73%, to trade at $1,346.95 a troy ounce by 3:05AM ET (07:05GMT), after rising $9.40, or 0.7%, on Tuesday.
Investors will be focusing on minutes of the Federal Reserve’s most recent policy meeting due at 2:00PM ET (18:00GMT) for further clarity on the timing of the next U.S. rate hike.
Ahead of the minutes Wednesday, St. Louis Fed President James Bullard speaks at 1:00PM ET (17:00GMT).
The Fed kept interest rates unchanged following its meeting on July 27 and said near-term risks to the U.S. economic outlook had diminished. However, the central bank stopped short of signaling a near-term rate rise.
Fed funds futures are currently pricing in a 15% chance of a rate hike by September. December odds were at around 53%, up from 42% a day earlier.
Speculation of a U.S. rate hike in the coming months mounted following hawkish comments from a pair of Fed officials on Tuesday.
New York Federal Reserve head William Dudley said that the U.S. is edging closer toward the point in time where it will be appropriate to raise interest rates further.
In addition, Atlanta Fed President Dennis Lockhart said that two rate hikes in 2016 were a possibility.
Gold is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.
The dollar rebounded from 7-week lows against the yen and euro on Wednesday as fresh hopes for a 2016 rate hike by the Federal Reserve lifted demand for the greenback.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.2% at 94.96, after falling to 94.37 in the prior session.
For the year, the precious metal is up nearly 26%, boosted by concerns over global growth and expectations of monetary stimulus.