Gold sulks near 7-month low as dollar basks in safe-haven demand

© Reuters. FILE PHOTO: A saleswoman shows gold bangles to a customer at a jewellery showroom on the occasion of Akshaya Tritiya, a major gold buying festival, in Kolkata, India, May 3, 2022. REUTERS/Rupak De Chowdhuri

By Bharat Gautam

(Reuters) - Gold hovered near a fresh seven-month low on Wednesday, with the dollar perched at a two-decade peak, as investors continued to snub bullion and look to the greenback for safety amid growing anguish over a worsening global economic outlook.

Spot gold was last up 0.1% at $1,766.54 per ounce at 0623 GMT, after it dipped to $1,762.45, its lowest since mid-December. U.S. gold futures firmed 0.1% to $1,764.60.

After dropping through support around $1,790-$1,800 on Tuesday, gold could head lower in the medium term, said Michael McCarthy, chief strategy officer at Tiger Brokers, Australia.

The twin effect of a stronger U.S. dollar because of higher rates, and higher rates themselves having a direct impact on bullion, are weighing on the outlook for gold, McCarthy said.

Asian stocks fell and the dollar dominated against the euro on Wednesday as investors' fears deepened that the continent is leading the world into recession. [MKTS/GLOB]

The dollar index consolidated near its highest since 2002 - levels which sent greenback-priced gold as much as 2.6% lower on Tuesday. [USD/]

Spot gold may test a support at $1,756 per ounce, and a break could trigger a drop to $1,748, Reuters' technical analyst Wang Tao said. [TECH/C]

Meanwhile, the U.S. Federal Reserve will release minutes from its June policy meeting later in the day, which could give investors a clearer picture on the roadmap for interest rates.

More major central banks raised rates in June than in any month for at least two decades, Reuters calculations showed, and with inflation at multi-decade highs, policy-tightening is unlikely to let up this year.

Higher rates and bond yields raise the opportunity cost of holding bullion, which yields nothing. [US/]

Spot silver dipped 1.2% to $18.96 per ounce, its lowest level in two-years.

Platinum fell 1.3% to $853.67, and palladium slipped 0.1% to $1,932.08.