Gold prices crept up on Tuesday ahead of the release the next day of minutes of the last US Federal Reserve meeting, which could offer clues on the pace of potential interest rate hikes by the central bank. Spot gold was up 0.2 per cent at $1,279.21 per ounce by 0553 GMT.

The metal fell about 1.4 per cent on Monday in its biggest one-day percentage drop since September 11. US gold futures for December delivery gained 0.3 per cent to $1,279.20.

“Given the fact that the December rate hike is almost a done deal, market watchers will look more closely at what is the Fed rhetoric for post-December,” said OCBC analyst Barnabas Gan.

Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.

Swearing-in of Fed Chair

Fed Chair Janet Yellen had said on Monday she would resign her seat on the Fed's Board of Governors once Jerome Powell is confirmed and sworn in to replace her as head of the US central bank.

“The fact that Yellen has now confirmed (she will be leaving) is adding a little bit of volatility as traders adjust their positions while they make sense of the implications of the incoming new Fed chairman Jerome Powell in terms of interest rate direction,” said Loh Mun Chun, director, private wealth at GoldSilver Central in Singapore.

North Korea tensions

Traders were also keeping an eye on safe-haven demand for gold after US President Donald Trump put North Korea back on a list of state sponsors of terrorism on Monday.

“It is very hard to predict as to what Trump is going to do ... We are waiting to see how North Korea reacts and whether it escalates global tensions,” OCBC's Gan said.

Spot gold may break support at $1,274 per ounce, and fall towards the October 6 low of $1,260.16, according to Reuters technical analyst Wang Tao.

In other markets, the dollar gave back some of its gains in Asian trading but remained within sight of a one-week high against a basket of currencies as German political uncertainty continued to pressure the euro.

With the US dollar weakening slightly after its overnight rally, gold maintained its inverse relationship and drifted higher, said Jeffrey Halley, a senior market analyst with OANDA.

Silver rose 0.2 per cent to $16.95 an ounce and platinum was up 0.5 per cent at $928.50. Palladium gained 0.3 per cent to $991.50 an ounce. On Monday, silver fell 2.3 per cent, its biggest one-day percentage fall since September 26, while platinum lost nearly 3 per cent, marking its worst day since early May.

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