Source: FX168

The price of gold fell below $2,390 on Wednesday (May 22) as investors waited for the minutes of the Federal Reserve's most recent policy meeting to learn more about the interest rate cut schedule.

As of press time, spot gold fell 1.34% to $2488.43 per ounce. The price hit a record high of $2450.08 on Monday.

Ole Hansen, head of commodity strategy at Saxo Bank, said: “Gold is consolidating after a sharp rise. In the short term, without additional support from the US dollar and the prospect of interest rate cuts, gold may not rise further. However, the gold market has always been very strong, and the mentality of buying on dips still exists.”

The minutes of the Federal Reserve's May policy meeting will be released at 2 p.m. EST.

Recent remarks by US Federal Reserve policymakers have reiterated the view that not enough progress has been made in reducing inflation to the Federal Reserve's 2.0% target, so there is no need to lower interest rates.

Their views weigh on the price of gold, and as a non-profitable asset, gold often underperforms when interest rates are high due to the increased opportunity cost of holding gold.

Gold prices are expected to continue to fall if the minutes reflect a tougher shift in policy makers' positions.

The minutes of the recent Reserve Bank of Australia (RBA) meeting show that Reserve Bank of Australia officials have discussed the possibility of raising interest rates — a significant shift in position compared to previous meetings.

Recent economic data showed a downward trend in inflation, but Bank of America policymakers said on Tuesday that the Federal Reserve should wait a few more months to ensure that inflation actually returns to the target level of 2% before cutting interest rates.

Gold is known as an inflation hedge, but the opportunity cost of holding this interest-free asset increases as interest rates rise.

Tim Waterer, chief market analyst at KCM Trade, said in a report: “Fundamentally speaking, the outlook for gold remains constructive, and central bank purchases support demand.”

“If the price of gold were to move in the direction of $2,450 again, it would first need to clear the mild resistance of $2,436.”

Spot silver fell 0.5% to $31.81, hitting a new high of more than 11 years on Monday.

Saxo Bank's Hansen said, “People are very concerned about silver. It's probably easier to buy silver because it hasn't reached record levels compared to gold, but at the same time, we need to focus on the gold to silver ratio.”

editor/tolk