Gold steadied on Wednesday off the previous day's two-week low as the dollar retreated after its biggest daily rise in two years, but remained under pressure from expectations that a US rate increase may come soon. Gold fell 1.7 percent on Tuesday, its biggest one-day drop this month, after firmer US data supported the view that the Federal Reserve may raise interest rates this year.
That would lift the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced. Spot gold was $1,186.66 an ounce at 1418 GMT, little changed from late Tuesday, while US gold futures for June delivery were down 50 cents at $1,186.60. The metal has held within a $1,175-1,125 range for most of the last month. "Gold got hit by a double whammy yesterday, first of all from the dollar move higher, which kicked off on Friday, but also speculative data which showed a 140 percent jump as of last Tuesday," Saxo Bank's head of commodity research Ole Hansen said. "Today we have stabilised once again ahead of the 1170/80 band of support."
"(There is) no doubt that many are frustrated about the price action during the past couple of months, and a break is needed soon to clear the air," he added. Positive data on US business investment spending, consumer confidence and house prices on Tuesday was in line with Fed Chair Janet Yellen's comments last week that indicated the US central bank is poised to raise rates later this year. That boosted the dollar and weighed on shares. A string of reversals from the previous day's sharp moves marked global financial market trading on Wednesday, with stock markets and crude oil rising and the US dollar retreating.
Former Federal Reserve Chairman Ben Bernanke emphasised on Wednesday that a move to raise US rates should be viewed as a positive sign for the world's largest economy. Tuesday's gold price drop did little to stimulate demand from price-sensitive consumers in Asia, dealers said. "Following the overnight rout, we were expecting to see some interest from Asia during today's session, however aside from a moderate level of support courtesy of Chinese trade, interest was generally muted," MKS said in a note.
Silver was down 0.2 percent at $16.68 an ounce, while platinum was down 0.2 percent at $1,121 an ounce and palladium was up 0.8 percent at $783.25 an ounce. Silver remains the best-performing precious metal this month despite Tuesday's 2.4 percent drop, up 3.4 percent since the end of April in its biggest monthly rise since January.
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