Gold prices edged lower on Wednesday, moving away from the key psychological level of $1,800, as risk appetite spurred by less hawkish comments from U.S. Federal Reserve officials outweighed support from lower Treasury yields.
Spot gold dipped 0.2% to $1,796.66 per ounce, as of 0640 GMT. U.S. gold futures were down 0.1% to $1,798.80.
“The shift towards a more risk-on approach by investors is probably gold-negative, however, the resultant weakness in the dollar helps gold, and the decrease in U.S. TIPS yields has provided support for gold,” said Nicholas Frappell, a global general manager at ABC Bullion.
“(St. Louis Fed President James) Bullard’s comments on the topic of a 50 bp rise is part of a tendency among Fed officials to soften the markets’ take on the pace and extent of tightening in 2022.”
A noted hawk, Bullard said on Tuesday he would argue for interest rate rises in March, May and June, but did not favour a half-point move.
Although gold is considered a hedge against inflation, rate hikes would raise the opportunity cost of holding non-yielding bullion.
When the Fed takes a solid decision about hiking rates next month, investors will get a direction, said Hareesh V, head of commodity research at Geojit Financial Services in India, adding that until then gold was likely to be lacklustre.
Wall Street advanced on Tuesday and the energy index closed at a multi-year high, although seesaw trading reflected investor uncertainty about how to play the current market.
The dollar index steadied near one-week lows, making gold attractive for other currency holders.
Benchmark U.S. 10-year Treasury yields edged lower, limiting losses in non-interest bearing bullion.
Spot silver slipped 0.1% to $22.62 an ounce and platinum fell 0.1% to $1,025.91, while palladium rose 0.2% to $2,368.15.