Gold slides over 1% on dollar strength as Fed meeting looms

[BENGALURU] Gold prices fell more than 1 per cent on Monday, weighed down by a stronger dollar and easing concerns about inflation, while investors awaited cues from the US Federal Reserve's policy meeting due later this week.

Spot gold was down 1.1 per cent to US$1,856.30 per ounce by 9.08am GMT, after hitting its lowest since May 19 at US$1,854.39.

US gold futures fell 1.1 per cent to US$1,858.20.

Along with a stronger dollar, profit-taking is weighing on the metal, said independent analyst Ross Norman, adding that the market was seeing a bit of book squaring ahead of the Fed's June 15-16 meeting.

"What really matters is to what extent the Fed is going to be focusing on the immediate problem, which is likely inflation, or the longer-term problem, which is going to be tapering," Mr Norman said.

The dollar was little changed after posting its biggest weekly rise in six weeks.

Last week, data showed a sharp rise in May US consumer prices. But Fed officials have repeatedly said inflation would be transitory.

Gold is traditionally considered a hedge against inflation that may be triggered by widespread stimulus measures.

"The Fed is expected to leave policy unchanged and again play down taper talk," ING analysts said in a note.

"Nonetheless, markets will be looking for hints on whether the Fed is starting to acknowledge that inflation may not be as transitory as thought. A technical adjustment to address the rapid build-up in excess liquidity is certainly possible, but dollar downside risks remain."

Speculators reduced their net long positions in Comex gold in the week ended June 8 and raised their net long positions in silver.

Elsewhere, silver fell 0.7 per cent to US$27.69 per ounce, palladium dropped 0.6 per cent to US$2,759.04, and platinum dipped 0.4 per cent to US$1,145.83.

REUTERS