Gold retreats 2pc as dollar turns around; Fed minutes eyed

Gold prices dropped over 2% on Wednesday, retreating further from the key $2,000 an ounce level, as the dollar rebounded from two-year lows and US equities rallied to record highs ahead of release of US Federal Reserve minutes.

Spot gold fell 1.8% to $1,965.01 per ounce by 1:41 p.m. EDT (1741 GMT), while US gold futures settled 2.1% lower at $1,970.30.

"The dollar is brushing up against some very strong resistance and we're going to need a strong signal from the Fed to see the next wave of selling pressure to hit the dollar," said Edward Moya, senior market analyst at broker OANDA.

The dollar rose 0.5%, halting a five-session slide, while the S&P 500 and the Nasdaq indexes hit all-time highs.

Higher stock markets and the dollar's effort to stabilize are acting as short-term headwinds for gold, George Gero, managing director at RBC Wealth Management, said in a note.

However, he added any dips in gold will be bought on concerns over the global economy and increasing inflation expectations with more debt and stimulus.

Minutes from the Fed's July 28-29 policy meeting are scheduled to be released at 2 p.m. EDT (1800 GMT), with investors awaiting for cues on future policy measures to support the virus-stricken economy.

"The Fed policy is going to remain extremely accommodative; there's too much uncertainty and some stalling in large parts of the recovery," Moya said.

Widespread stimulus measures and a low interest rate environment pushed gold prices to an all-time peak on Aug. 7, but bullion has pared gains since then.

Gold was also pressured on Wednesday as a senior Trump administration official said a smaller coronavirus relief bill worth around $500 billion could be reached, as opposed to one between $1-$3 trillion that had been previously expected.

Elsewhere, silver fell 1.1% to $27.34 per ounce. Platinum dropped 1.8% to $939.12 and palladium fell 1.1% to $2,164.83.