Investing.com -- Gold fell as much as 1% in Wednesday's session, as the dollar hovered around four-month highs, ahead of a critical interest rate decision by the European Central Bank's Governing Council on Thursday afternoon in Frankfurt.
On the Comex division of the New York Mercantile Exchange, Gold for August delivery traded between $1,313.45 and $1,338.50 an ounce before settling at $1,319.45, down 12.85 or 0.96% on the session. At session-lows, Gold tumbled to its lowest level since late-June in the midst of the Post-Brexit rally. Despite the recent slide, Gold is still up more than 24% since January 1 and is on pace for one of its strongest years over the last decade.
Gold likely gained support at $1,253.70, the low from June 24 and was met with resistance at $1,368.60, the high from July 7.
Gold extended overnight losses, as investors awaited the ECB's Governing Council's first monetary policy meeting since last month's historic U.K. referendum. On Wednesday, economic indicators showed that consumer confidence in the European Union fell sharply by 1.8 in June to Minus-7.6, dropping to the lowest level since November, 2014. In the euro area, the DG ECFIN flash consumer confidence index declined by 0.7 from an upwardly revised Minus-7.2 to Minus-7.9. Analysts expected a reading of Minus-8.0. The Governing Council is widely expected to stand pat at Thursday's meeting, amid a relative lack of data following the U.K.'s decision to leave the EU on June 24.
The ECB meeting comes days before the Federal Open Market Committee (FOMC) will convene for its two-day July meeting in the middle of next week. Since the Fed left short-term interest rates unchanged at its June FOMC meeting, participants have been largely split on the timing of its next rate hike, amid strong employment and housing figures. The CME Group's (NASDAQ:CME) Fed Watch tool now sees a 41.6% chance of a 25 point basis hike in December, up from around 20% last week.
Investors who are bullish on Gold are in favor of a gradual tightening of monetary policy by the Fed. Gold, which is not attached to interest rates, struggles to compete with high-yield bearing assets in rising rate environments.
Elsewhere, the Dow Jones Industrial Average rose as much as 60 points on Wednesday to an intraday high of 18,622.01, hitting an all-time intra-session high. With several hours left in Wednesday's session, the Dow was on pace for its ninth consecutive win – its longest streak in three years. As foreign investors have piled into U.S. equities in broad risk-on trade, gold has lost some momentum over the last week.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose by more than 0.20% to an intraday high of 97.37. At session-highs, the index reached its highest level since March 10.
Dollar-denominated commodities such as gold become more expensive for foreign investors when the dollar appreciates.
Silver for September delivery plummeted 0.395 or 1.97% to 19.612 an ounce.
Copper for September delivery fell 0.011 or 0.49% to 2.252 a pound.