Gold prices experienced a decline on Wednesday, influenced by a strengthening dollar. Investors were seen eagerly awaiting the release of the Federal Reserve's minutes from its latest policy meeting, along with upcoming U.S. jobs data, in the hopes of gaining more clarity on potential interest rate cuts.

Taking a hit, spot gold recorded a drop of 1.2%, reaching $2,033.85 per ounce. Similarly, U.S. gold futures also fell by 1.5%, resting at $2,041.5 per ounce. Han Tan, Chief Market Analyst at Exinity Group, explained, "Gold is holding steady as markets still grapple with the odds surrounding Fed rate cuts this year."

Tan further added, "Spot gold should retain its upside bias as long as the Fed rate cuts narrative can remain intact. However, the precious metal may be forced into unwinding recent gains if the Fed isn't able to press ahead with the policy pivot as anticipated for 2024."

With the release of minutes from the U.S. central bank's December policy meeting imminent, traders remained cautious. Additionally, investors were eagerly anticipating a range of U.S. economic data scheduled for later in the week, including the non-farm payrolls report on Friday.

Looking at futures markets, CME's FedWatch Tool revealed a 70% probability of a 25 basis points rate cut at the March meeting. Despite the Fed's recent pivot on forward guidance in December, there still exists a significant disparity between the market's expectation for aggressive rate cuts and the Fed's most recent "dot plot" projection, as highlighted by Mike Ingram, Market Analyst at Kinesis Money.

Ingram elaborated, "The minutes of the FOMC's December meeting, expected later today, may shed further light on the Fed's current thinking."

The tension in the Middle East also remained a focal point for market participants. The incident involving the killing of Hamas deputy leader Saleh al-Arouri in a drone strike carried out by Israel in Lebanon's capital, Beirut, on Tuesday has heightened concerns and garnered close attention from market observers.

As traders keep an eye on unfolding events globally, market movements continue to be influenced by various factors, including the dollar's strength, the Fed's monetary policy decisions, and geopolitical tensions in the Middle East.

Disclaimer: This article is for informational purposes only and should not be construed as financial advice.