Gold fell back towards $1,300 an ounce on Wednesday ahead of the minutes of the US Federal Reserve's latest policy meeting, as a firmer dollar and fresh outflows from bullion-backed funds pulled prices off near two-week highs. Worries over Ukraine, as well as technical momentum after a break above $1,300, helped lift gold nearly 1 percent on Tuesday, but uncertainty over US monetary policy and weak physical and investment appetite curbed that rally.
Spot gold was down 0.5 percent at $1,301.05 an ounce at 1334 GMT, off a session high of $1,314.00 an ounce it hit earlier. US gold futures for June delivery were down $7.40 an ounce at $1,301.70. "We're still struggling with the upside in thin trading amid a lack of physical buying or any significant investor interest," Andrey Kryuchenkov, an analyst at VTB Capital, said.
"We had opportunistic longs entering on a rebound off $1,280 with some short covering, but in the long run there is very little agenda for the bulls," he said. "Investors will look elsewhere should developed economies continue to recover." European shares drew investment, meanwhile, rising more than half a percent after a difficult few days in which tensions escalated in Ukraine and the European Central Bank curbed expectations of a new mass asset-buying programme.
The dollar index recovered from three-week lows to rise 0.1 percent, rebounding against the Japanese yen after its biggest fall in more than seven months. "We do not see much more upside (for gold) here unless the dollar tumbles even more or Ukraine tensions escalate once more," VTB Capital said in a note. "We do not expect sustained gains in the short run, given limited physical demand and little investor interest."
"Today market participants will pay some attention to the March FOMC meeting minutes," it added. Physical gold funds showed further outflows, with holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, falling 2.7 tonnes to 806.48 tonnes on Tuesday.
That reduced its net inflow for the year to just 8 tonnes. The fund has not seen any fresh inflows since March 24. On the physical markets, buying picked up slightly in China, the world's largest gold consumer. Bullion prices on the Shanghai Gold Exchange reached a premium of about $1 an ounce to spot prices for the first time since early March.
They were at a discount of as much as $10 last month on weak demand. Among other precious metals, silver was down 1.4 percent at $19.71 an ounce, while spot platinum was down 0.2 percent at $1,431.25 an ounce and spot palladium was up 0.2 percent at $773.25 an ounce. The platinum group metals are being supported by an ongoing miners' strike in South Africa, source of some three-quarters of global platinum supply and about a third of mined palladium output.
South African coal producer Exxaro said on Wednesday it hoped to diversify into platinum group metals and was looking at opportunities that could include assets Anglo American has signalled it might divest. Anglo American is the parent company of the world's biggest platinum miner, Anglo American Platinum.