Investing.com -- Gold retreated from near 28-month highs on Wednesday amid heavy short covering, as investors await a highly-anticipated meeting from the Bank of England where policymakers in the U.K. could approve their first interest rate cut in seven years.
On the Comex division of the New York Mercantile Exchange, Gold for December delivery traded between $1,360.65 and $1,373.20 an ounce before settling at $1,364.25, down 8.45 or 0.62% on the session. With the slight declines, Gold halted a six-day winning streak over the last week. Since opening the year near $1,075 an ounce, Gold has soared more than 28% over the last six months and is on pace for one of its strongest years in a decade.
Gold likely gained support at $1,337.50, the low from July 20 and was met with resistance at $1,391.40, the high from March 14, 2014.
On Thursday morning, the Bank of England is largely expected to slash its benchmark interest rate to a record-low of 0.25%, following a string of soft economic data in the weeks since June's historic Brexit decision. When voters in the U.K. approved a referendum paving the way for Britain's departure from the European Union on June 24, BOE governor Mark Carney sent strong hints that the bank could reduce rates and introduce further easing measures at some point over the summer in order to help avert a significant economic downturn. Historically, interest rate cuts from the BOE have been associated with a sharp depreciation in the Pound. Over the last six weeks, GBP/USD has tumbled more than 10% following the surprising Brexit move.
Following the Bank of England's rate decision, market players will turn their attention to a closely-watched U.S. employment report for the month of July on Friday for a clearer picture on the state of the U.S. labor market. Ahead of the report, payroll solutions firm ADP said in its monthly National Employment report that the economy added 179,000 nonfarm payroll positions in July, above consensus estimates of 165,000. On Tuesday, Federal Reserve Bank of Atlanta president Dennis Lockhart said he will closely watch the next two monthly employment reports before the Fed meets again in September. In addition, Chicago Fed president Charles Evans told reporters on Wednesday afternoon that one rate hike this year could be appropriate if inflation continues to move closer to the Federal Reserve's 2% target.
Any rate hikes by the Fed this year are viewed as bearish for gold, which struggles to compete with high-yield bearing assets in periods of rising rate environments.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose by more than 0.40% to an intraday high 95.35, bouncing off five-week lows. On Tuesday the index slipped below 95 for the first time since June 24. Before Wednesday's rebound, the Dollar had fallen sharply since hitting four-month highs at 97.62 early last week.
Dollar-denominated commodities such as Gold become more expensive for foreign purchasers when the dollar appreciates.
Silver for September delivery fell 0.244 or 1.18% to 20.457 an ounce.
Copper for September delivery lost 0.011 or 0.50% to 2.198 a pound.