Gold Recovers As Fed Minutes Confirm Forecasts

Gold recouped some of its losses on Wednesday as minutes from a Federal Reserve meeting indicated that the central bank would maintain its plan to raise interest rates by a half-point at its June and July meetings.

At 4:15 p.m. ET (2015 GMT), spot gold declined 0.7% to $1,853.80 per ounce, after falling 1.3% to $1,844.49 earlier in the session. Gold futures in the U.S. closed down almost 1 percent at $1,846.3.

According to the minutes of the Federal Reserve's policy meeting on 3-4 May, all participants supported a half-percentage-point rate hike to battle inflation that threatened to surge without central bank intervention.

After the minutes were released, gold reduced losses, but remained down, having been lower for the majority of the day due to a higher dollar.

While the Fed minutes were mostly in line with market expectations, the Fed did indicate that 50 basis point hikes would likely be appropriate for the June and July meetings, according to Standard Chartered analyst Suki Cooper (OTC:SCBFF). The market will likely continue to focus on inflation data and indications of reducing cost pressures.

Even while gold is commonly viewed as a hedge against inflation, rate rises diminish its attractiveness since they tend to increase bond rates, increasing the opportunity cost of keeping zero-yield metal.

Christine Lagarde, president of the European Central Bank, has secured critical allies for her proposal to lift rates out of negative territory this summer.

Spot silver lost 0.5% to $21.99 per ounce, platinum fell 0.6% to $948.95 per ounce, while palladium climbed 0.1% to $2,002.22 per ounce.

Analysts at Commerzbank (ETR:CBKG) wrote in a note, "Platinum and palladium are being restrained by the continued challenges in the automobile industry, which is dampening demand for these precious metals."