Investing.com - Gold prices reversed course in Asia and fell as investors await minutes from the Federal Reserve's most recent policy meeting to determine sentiment on the path of U.S. interest rates in 2016.
On the Comex division of the New York Mercantile Exchange, gold futures for April delivery eased 0.73% to $1,199.40 a troy ounce.
A story in the Wall Street Journal that hedge-fund manager John Paulson pared a long-bet on gold in the fourth quarter also dampened demand for the yellow metal.
Silver futures for March delivery fell 0.81% to $15.210 a troy ounce and copper futures for March delivery inched up 0.04% to $2.050 a pound.
Overnight, gold continued its retreat from 12-month highs on Tuesday, as investors awaited the release of the Federal Open Market Committee's minutes from its January meeting for further signals of possible divergence between the Federal Reserve and other major central banks throughout the world.
Since surging by more than $60 an ounce to one-year highs last Thursday, gold has erased nearly all of the gains from the session by falling back approximately 3.6% over the last four sessions. The precious metal is still up nearly 14% since the start of the year, on pace for one of its strongest quarters in 30 years.
Gold likely gained support at $1,063.20, the low from January 4 and was met with resistance at $1,260.80, the high from Feb. 11.
Investors continued to digest dovish comments from European Central Bank president Mario Draghi on the strong possibility that its Governing Council will approve further easing measures when it holds its next monetary policy meeting in March. Speaking before the European Parliament's Economic and Monetary Affairs Committee in Brussels on Monday, Draghi indicated that the ECB will not show reluctance to act if persistent financial market turmoil or low energy prices continue to impact inflation expectations.
Last month, an ECB survey of 57 economists showed that annual inflation expectations for 2016 fell to 0.7%, down 0.3% from previous forecasts three months earlier. While forecasters anticipate that inflation in the euro zone will increase in each of the following two years, it is still expected to remain below the ECB's targeted goal of 2% through the end of 2018.
Crude prices have hovered around 12-year lows over the last two months, while euro zone banking stocks have tumbled in recent weeks amid concerns related to a rout in the high-yield sector and the ramifications of the adoption of negative interest rate policies at major central banks across the continent.
"We will examine the strength of the pass-through of low imported inflation to domestic wage and price formation and to inflation expectations. This will depend on the size and the persistence of the fall in oil and commodity prices and the incidence of second-round effects on domestic wages and prices," Draghi said.
"In light of the recent financial turmoil, we will analyze the state of transmission of our monetary impulses by the financial system and in particular by banks. If either of these two factors entail downward risks to price stability, we will not hesitate to act."
When the FOMC releases the minutes from its January meeting on Wednesday afternoon, investors could receive further indications on the pace of tightening the U.S. central bank will embark on over the next several months. While Janet Yellen testified last week that it is unlikely that economic conditions will force the FOMC to cut short-term interest rates, the Fed chair did not take negative interest rates off the table.
In late-January, the Bank of Japan spooked global markets by pushing its benchmark rate below zero for the first time in history. With the ECB's deposit rate already in subzero territory, it marks the first time on record that two of the three top central banks in the world have operated negative interest rate policies at the same time.
Any rate hikes by the Fed this year are viewed as bearish for gold, which struggles to compete with high-yield bearing assets in rising rate environments.