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Gold steadied above $1,250 an ounce on Wednesday, taking a breather after the previous day's fall as investors awaited minutes of the Federal Reserve's latest meeting for clues on the outlook for US interest rates.
The metal is highly sensitive to rising US rates, which increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
Spot gold was at $1,251.27 an ounce at 0920 GMT, little changed from $1,250.76 late on Tuesday, when it slipped 0.7 per cent after two days of gains.
The minutes of the Federal Open Market Committee's early May meeting are due to be released at 1800 GMT. Interest rate futures on Tuesday implied traders saw about an 83 per cent chance of a rate increase in June, up from 79 per cent on Monday.
“(Gold is) range bound today indeed, with the focus on the May FOMC minutes,” Saxo Bank's head of commodity research Ole Hansen said.
“The market is looking to see whether the 75 percent-plus chance of a June rate hike is justified.”
Gold has risen 3 percent since hitting a near-two month low of $1,213.81 on May 9, driven chiefly by political turmoil in the United States after President Donald Trump fired FBI director James Comey, which prompted a drop in stock markets and put the dollar under pressure. Expectations for U.S. interest rates to rise next month and potentially again later in the year have been a major factor keeping gold prices pinned below chart resistance at $1,300 an ounce this year, however.
“While the selling appetite seems to be fading following four weeks of long liquidation, (gold) still needs a catalyst to break higher,” said Hansen.
“At this stage the risk-reward seems skewed to the upside, but with the multi-year downtrend lurking just above I see muted fund interest until a potential break has been realised.”
World stock markets eased on Wednesday after China's sovereign credit rating was downgraded and as investors eyed a pause in Wall Street's four-day winning streak, the longest in over three months.
The dollar was little changed against a currency basket. U.S. gold futures for June delivery were down $3.60 an ounce at $1,251.90. Among other precious metals, silver was down 0.1 percent at $17.02 an ounce, while platinum was 0.2 percent lower at $938.30 an ounce. Both were correcting after hitting their highest since late April in the previous session.
Palladium was up 0.4 percent at $773.85 an ounce.
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