Gold slipped back towards $1,240 an ounce on Wednesday, after three straight day's of gains, as the US dollar's recovered slightly from a 10-month low. Bullion held below Tuesday's 2-1/2-week high, when prices were buoyed by the failure of US President Donald Trump's healthcare bill to pass the US Senate and by waning expectations for further interest rate hikes from the Federal Reserve this year.
The US dollar index rose 0.2 percent, with the euro down 0.3 percent, however, taking upward pressure off gold. Spot gold was down 0.05 percent at $1,241.35 an ounce by 2:56 pm EDT (1856 GMT), while US gold futures for August delivery closed little changed, up 0.01 percent at $1,242.
"With the sluggish dollar yesterday we had a bit of a move on the upside, but there seems to be some light profit taking coming in between $1,243-1,245," MKS's head of trading Afshin Nabavi said. The US currency remained rangebound, however, with investors wary of making strong bets ahead of major central bank meetings.
Expectations that US monetary policy is on a tightening path kept gold hemmed into a narrow range in the last quarter after a strong start to the year. Signs that central banks in Europe and elsewhere are also turning away from ultra-loose monetary policies have also weighed on the precious metal. Gold is highly sensitive to rising interest rates, as these increase the opportunity cost of holding non-yielding bullion. Rising US rates also lift the dollar, in which gold is priced.
"It appears as if some Wall Street gold traders long from the $1,232 area are hoping for this rally to continue and would be satisfied heading for the exits around the $1,248-$1,252 range," said Walter Pehowich, executive vice president of investment services at Dillon Gage Metals. Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, fell 5.6 tonnes to 821.45 tonnes on Tuesday, a low since early February.
"We believe a large part of the interest rate hike (and) monetary tightening expectations are already priced in, so we don't think that should weigh too much more on gold prices," said ING analyst Warren Patterson. Silver was up 0.2 percent at $16.28 an ounce, off an earlier two-week high of $16.36. Platinum fell 0.6 percent at $916.25, while palladium was down 0.6 percent at $858.75 an ounce.
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