On Wednesday gold extended the previous session's slide, as the dollar was stronger ahead of minutes from the Federal Reserve's latest policy meeting, which will be closely watched for clues on the U.S. rate outlook.
Spot gold was down 0.1 percent at $1,206.05 an ounce at 0925 GMT, while U.S. gold futures for June delivery were down 80 cents at $1,205.90.
On Tuesday the yellow metal saw a steep fall, logging its biggest one-day loss since April 30, as the dollar regained ground after its weakest run against the euro in four years. Yesterday prices fell 1.5 percent after hitting a three-month high of $1,232.20 on Monday.
Elsewhere in metal trading, silver was up 0.2 percent at $17.07 an ounce after falling 3.6 percent on Tuesday, its biggest one-day slide in three months. Platinum was down 0.2 percent at $1,151 an ounce and palladium was up 0.9 percent at $782.50 an ounce.
Commerzbank analyst Daniel Briesemann commented that "The up move last week was driven partly by speculation, the CFTC data show, so maybe these short-term oriented market players are (also) taking the higher prices as an excuse for profit taking."
"The $1,200 mark seems to be hard for gold to overcome," he said. "I wouldn't be surprised to see prices falling back below this level."
Since mid-February, gold prices have struggled to break out of a $1,175-$1,125 /oz range, hamstrung by uncertainty over
the timing of an expected U.S. interest rate rise. Higher rates tend to weigh on gold, as they increase the
opportunity cost of holding non-yielding bullion, while boosting
the dollar, in which it is priced. A decline in SPDR Gold Trust's holdings, the world's largest
gold-backed exchange-traded fund, to a four-month low of 718.24
tonnes on Monday also pointed to cautious investor sentiment. Dealers say that appetite for physical gold was dim in Asia. "I think traders had high hopes that we may see some pent
up physical demand unleashed today that had been non-existent
above $1210, yet it never eventuated," MKS said in a note.
