Gold prices dropped 0.3 percent at $1,255.7 an ounce on Tuesday as the dollar strengthened on increasing bets that the Federal Reserve will raise U.S. interest rates in December. Chicago Fed President Charles Evans said in Sydney he "could be fine" with raising rates in December, but would first like to see how the economy and inflation progressed. Traders have priced in a 70 percent chance that the Fed will raise rates at a Dec. 13-14 meeting, up from last week. The prospect of interest rate hike was damaging to gold. The dollar hit an 11-week high against a basket of six major currencies, and breached above 97.5, the highest since July, to around 97.7. The dollar index is consolidating at around 97.6, retaining steam for further hike in near term, and is expected to breach above the key mark of 98, making dollar-denominated gold more expensive for holders of other currencies. Investors awaited Wednesday's release of minutes of the latest Federal Reserve Open Market Committee meeting to see how close the central bank came last month to hiking rates.
On chart, gold could find strong support at around $1,250 with the 100-week and 50-week moving average converging with the lower band of the downward path, suggesting the level is unlikely to be breached. In case that gold fell sharply to the range between $1,200 and $1,230, gold would be kept under great pressure, endangering the integral mark of $1,200. According to current moving trend, gold is more likely to move gradually to the aforementioned range ahead of the Federal Reserve’s policy meeting in December.
 

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