Gold hit by robust dollar ahead of Fed minutes

Gold struggled near its lowest in a week on Wednesday, after steep overnight losses triggered by a stronger dollar and stock market, with traders now waiting for minutes of the Federal Reserve's policy meet for clues on the US rate outlook.

Spot gold was little changed at $1,208.83 an ounce by 0328 GMT, near the week's low of $1,205.39 reached on Tuesday.

The metal lost 1.5 per cent in the previous session, snapping a five-day rally.

Demand for bullion weakened as the dollar climbed to a two-week high against a basket of major currencies, with the euro tumbling on news the European Central Bank was looking to accelerate the pace of money printing to buy government bonds over the next two months.

The greenback was also supported by strong US housing data on Tuesday that stoked hopes the Fed could raise rates soon.

The robust reading, after a string of mixed data, prompted investors to focus even more so on the minutes of the U.S. central bank's April meet to be released later in the day to gauge its outlook on interest rates.

"We suspect that Tuesday's housing data, coupled with recent employment growth, will likely dissuade the Fed from veering off course in terms of wording," said INTL FCStone analyst Edward Meir.

The Fed has said that an interest rate hike is dependent on economic data. Non-yielding bullion had gained recently on hopes the Fed would delay a rate hike due to sluggishness in the economy.

"All this should pressure the gold market somewhat further over the balance of the week via a stronger dollar," Meir said.

A stronger dollar makes gold more expensive for holders of other currencies, while also hurting its appeal as a hedge.

A drop in holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, to a four-month low of 718.24 tonnes on Monday also undermined investor appetite for gold.

Traders expect gold to dip further as technicals levels have weakened after the break of the five-day rally. Price support for the metal is now closer to $1,200 an ounce, traders said.

"Bullion's inability to hold above the 200-day moving average (of $1,216), which it recently broke only five trading sessions earlier, may be a sign that the gold market may continue to consolidate from recent gains," HSBC analyst James Steel said.