Gold prices drop on technical selling

Less- than- hawkish Fed lends support to precious metal

Gold prices edged lower on Tuesday, failing to break a key resistance, but hovered near a two- week high hit in the previous session on prospects of a lesshawkish Federal Reserve policy.

The Fed is likely to wait at least until June policy meeting to decide whether to lift US interest rates again, Chicago Fed President Charles Evans said on Monday.

Spot gold was down 0.4 percent at $ 1,228.61 per ounce as of 1: 56 pm Beijing time. In the previous session, it touched $ 1,235.50, its strongest since March 6.

US gold futures fell 0.4 percent to $ 1,228.60.

“What we are seeing is a bit of wash- out in short- term positioning as gold is unable to surpass the strong resistance at $ 1,237,” said Jeffrey Halley, senior market analyst at OANDA.

“But, there is no other way than looking bullish at gold for the moment. There are extended positions in dollar. We are going to see this dollar correction running for a while, which will support gold.”

Spot gold is expected to drop to $ 1,221 per ounce, following its failure to break a resistance at $ 1,237, Reuters technical analyst Wang Tao said.

“It looks like some weak longs stopped out this morning, but expect to see good buying between $ 1,215-$ 1,225 area,” a Hong Kong- based trader said.

The dollar index, which measures the greenback against a basket of other currencies, was down 0.2 percent at 100.240.

The lack of a concrete policy from US President Donald Trump’s administration is worrying investors, and more people will opt for gold when the stock markets go lower, analysts and traders said.

Expectations that the Fed will have to step up rate hikes to counter inflationary pressure from Trump’s stimulus are also waning after the central bank dropped no hints of an acceleration in credit tightening last week.