Investing.com - Gold futures sank to a three-week low in European trade on Thursday, adding to overnight losses, after the minutes of the Federal Reserve's latest policy meeting suggested a rate hike could come in June.
Gold for June delivery on the Comex division of the New York Mercantile Exchange slumped to a session low of $1,253.20 a troy ounce, a level not seen since April 28. It last stood at $1,255.55 by 06:56GMT, or 02:56AM ET, down $18.95, or 1.49%. A day earlier, gold dipped $2.50, or 0.2%.
Minutes of the Fed's April 26-27 policy meeting published Wednesday revealed that the central bank was likely to raise rates in June if economic data points to stronger second-quarter growth as well as firming inflation and employment.
Fed funds futures were signaling a 34% chance of a June rate hike by Thursday morning, compared to 16% before the release of the hawkish Fed minutes Wednesday afternoon and up sharply from just 4% a week ago. Gold is sensitive to moves in U.S. rates, as a rise would lift the opportunity cost of holding non-yielding assets such as bullion.
The growing possibility of a June rate hike lifted the dollar to seven-week highs. A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
Market players will pay close attention to comments from a pair of key Fed officials later in the day. Fed Vice Chair Stanley Fischer speaks at 13:15GMT, or 9:15AM ET, at an event at Columbia University, while New York Federal Reserve President William Dudley will hold a press briefing on the economy at 14:30GMT, or 10:30AM ET.
Besides the Fed speakers, traders will be watching closely when weekly jobless claims are released at 12:30GMT, or 8:30AM ET, after last week's surprising jump. The Philadelphia Fed survey is also released at 8:30AM.
Prices of the yellow metal are up nearly 19% so far this year amid indications the Fed will take a slow and cautious approach to raising interest rates this year due to concerns over the global economy. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.
Elsewhere on the Comex, silver futures for July delivery dropped 43.2 cents, or 2.52%, to trade at $16.70 a troy ounce during morning hours in London, while copper futures declined 2.2 cents, or 1.03%, to $2.057 a pound.