Gold struggles for direction as investors await Fed minutes

Gold struggled for momentum on Wednesday, as investors awaited minutes from the US Federal Reserve's last policy meeting that could offer clues on further interest rate hikes amid signs of easing inflation.

Spot gold was flat at $1,775.91 per ounce, as of 0242 GMT, after hitting its lowest since Aug 8 at $1,770.86 on Tuesday. US gold futures edged 0.1 per cent higher to $1,791.10.

"Focus is on minutes from the July Federal Open Market Committee meeting and the Jackson Hole Symposium on Aug. 25-27. Both these events will set the stage for Fed meeting in September," said Ilya Spivak, a currency strategist at DailyFX. "If we are going to get a more hawkish view from the Fed on rate hikes, that's going to be somewhat negative for gold in terms of its core appeal for investors."

The minutes of the Fed's July 26-27 policy meeting are due at 1800 GMT. The US central bank has raised its benchmark overnight interest rate by 225 basis points since March to tame high inflation. Traders were pricing in around a 42.5 per cent chance of a 75-basis-point rate hike and a 57.5 per cent chance of a 50-bp increase at the Fed's next meeting on Sept. 20-21. Although gold is seen as a hedge against inflation, rising US interest rates dull non-yielding bullion's appeal.

Despite signs of easing inflation in the world's largest economy, Fed officials have maintained a hawkish tone on future rate hikes that has led to a pullback in gold prices from the key $1,800 level. Holdings of SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, fell 0.18 per cent to 992.20 tonnes on Tuesday, its lowest since January.

The dollar , a rival safe-haven and which has a strong correlation with bullion, also held steady ahead of US retail sales data and Fed minutes. Elsewhere, spot silver eased 0.1 per cent to $20.09 per ounce, platinum fell 0.1 per cent to $933.86, and palladium was steady at $2,152.33.