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Gold prices slipped on Wednesday as a surge in US Treasury yields and an ongoing rally in equities dented the precious metal's safe-haven appeal. Spot gold was down 0.1 per cent at $1,311.56 an ounce by 0234 GMT. It had declined 0.6 per cent on Tuesday, in its biggest one-day drop in a month. US gold futures were down 0.1 per cent at $1,312.50 an ounce on Wednesday.
Benchmark US Treasury yields hit a 10-month high on Tuesday after the Bank of Japan tweaked its bond-buying programme. Wall Street's major indexes extend the New Year rally to record levels into a sixth day on Tuesday, but Asian shares slipped on Wednesday on profit-taking.
“We are wary about going long on gold at these levels... The spike in US Treasury yields is an obvious negative, as is the fact that the dollar is now quite oversold against a number of currencies,” said INTL FCStone analyst Edward Meir.
“We are particularly concerned by the latest CFTC data showing dollar short positions at multi-year highs and so a short-covering rally cannot be ruled out.”
A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies. The dollar index, which tracks the greenback against a basket of six major rival currencies, was down 0.1 per cent at 92.423 . It had touched a more than one-week high at 92.640 on Tuesday.
Fed rate hikes
The US Federal Reserve should keep interest rates low so that wage gains accelerate and inflation rises, Minneapolis Federal Reserve President Neel Kashkari had said on Tuesday.
Investors are betting on more US interest rate hikes after last week's payrolls data did nothing to challenge the outlook for monetary policy tightening by the US Federal Reserve. Higher rates could dent the demand for non-interest-paying gold.
“From a technical point of view, the area $1,300 now represents a support. If gold manages to remain above this level, markets could see this as a signal of strength from the buyers,” said ActivTrades chief analyst Carlo Alberto de Casa.
SPDR Gold Trust
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.35 per cent to 831.91 tonnes on Tuesday from Monday, the biggest drop since December 18, 2017.
Spot palladium fell 0.4 to $1,096 an ounce on Wednesday, after hitting its life-time high on Tuesday at $1,111.40. Silver was down 0.1 per cent at $16.93 an ounce. Platinum dropped 0.7 per cent to $958.70 an ounce.
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