By Virginia Harrison, MarketWatch
LONDON (MarketWatch)—Gold futures tumbled in electronic trading Wednesday, extending a downward risk-off run from the regular trading session after minutes from the Federal Reserve’s latest policy meeting undercut hopes for further monetary stimulus.
Gold futures for June delivery GCM2 -3.02% lost $39.70, or 2.4%, to $1,632.30 an ounce during European trading hours.
The losses tracked a sell off in global equities and added to a 0.5% drop notched Tuesday in the North American session, after minutes from the Federal Reserve signaled central-bank officials were less interested in another round of so-called quantitative easing through the purchase of bonds.
Expectations of monetary stimulus tends to benefit gold, as the metal is seen as a safe store of value and an inflation hedge.
The dollar, meantime, rallied after the Fed minutes and continued to strengthen during Asian and European trading on Wednesday.
The dollar index DXY +0.50% , which tracks the U.S. unit against a basket of six other currencies, rose to 79.631, from 79.410 in North American trade late Wednesday.
A higher greenback tends to pressure dollar-denominated commodities as it makes them more expensive to holders of other currencies.
“The impact of a higher U.S. dollar on the gold price will be particularly pronounced given that a large majority of gold is invested in the U.S.,” strategists at the National Australia Bank said.
“In the medium-to-longer term, we expect more certainty surrounding the European sovereign debt situation to emerge, while a relatively stronger U.S. dollar and a return to fundamentals should also help to lower prices,” the strategists added.
The National Australia Bank forecast gold to trade at around $1,620 an ounce over the June 2012 quarter.
The broader metals complex tracked gold lower, with silver leading declines.
Silver for May delivery SIK2 -4.55% plunged 3.8%, or $1.26, to $32.01 an ounce. May copper HGK2 -2.19% dropped 1.6%, or 6 cents, to $3.86 a pound.
Palladium for June delivery PAM2 -1.52% slumped $11.90, or 1.8%, to $647.70 an ounce, while platinum for July delivery PLN2 -2.54% dropped $28.90, or 1.7%, to $1,631.60 an ounce.
Virginia Harrison is a MarketWatch reporter based in Sydney.
