May 22 (Reuters) - Gold prices dipped over 1% on Wednesday as the gold rally cooled with investors booking profits, as traders pulled back from bets on Federal Reserve's rate cuts this year.
Spot gold fell 1.8% to $2,377.43 per ounce by 1858 GMT. Prices had scaled a record high of $2,449.89 on Monday.
U.S. gold futures settled 1.4% lower to $2,392.90. The U.S. dollar index (.DXY), opens new tab rose 0.3%, making bullion more expensive for other currency holders.
"You're seeing some week-long liquidation, some profit taking by the shorter term futures traders; all of which is not unusual in a market that hit a record high," said Jim Wyckoff, senior analyst at Kitco Metals.
"Tomorrow's gonna be an important trading day if the bulls need to bounce right back otherwise, there might be some near term chart damage."
Federal Reserve officials indicated that it would take longer than previously anticipated to gain greater confidence in inflation moving to 2%, according to the minutes of the U.S. central bank's April 30-May 1 session.
Bullion is also known as an inflation hedge, but the opportunity cost of holding this non-interest-bearing asset increases with higher interest rates.
Gold is also being held back by delayed rate cuts and unfulfilled recession fears along with selling by western investors, said Everett Millman, chief market analyst with Gainesville Coins.
Lately, economic data has pointed towards a downtrend in inflation, but U.S. central bank policymakers said that the Fed should wait several more months to ensure that inflation really is back on track to its 2% target before cutting interest rates.
Spot silver fell over 3% to $30.84 per ounce, after hitting a more than 11-year high on Monday.
Platinum fell 0.9% to $1,036.80, and palladium dropped about 3% to $999.75.
Reporting by Harshit Verma and Rahul Paswan in Bengaluru; Editing by Tasim Zahid and Shailesh Kuber
