Gold steadied after touching a 2-1/2 week low on Wednesday on reports that Republican senators favored John Taylor to become the next head of the US Federal Reserve, which drove US bond yields to multi-month highs. The Stanford University economist is seen as someone who would raise interest rates at a quicker pace.
Gold is sensitive to rising US interest rates because they push up bond yields and tend to strengthen the dollar. "If he (US President Donald Trump) does indeed choose Taylor, gold is likely to fall sharply," Commerzbank analysts said in a note. The market was pricing in one rate increase in December and one more next year, while the Fed itself envisaged three rate hikes in 2018 and was likely to move more rapidly than previously expected under Taylor.
While that kept prices of the precious metal under pressure, geopolitical risk pulled bullion prices back from earlier losses. A senior diplomat in North Korea said the foreign minister's warning of a possible atmospheric nuclear test over the Pacific Ocean should be taken literally. North Korean Minister of Foreign Affairs Ri Yong Ho said in September that Pyongyang may consider conducting "the most powerful detonation" of a hydrogen bomb over the Pacific Ocean amid rising tensions with the United States.
"I don't think the North Korea news makes gold prices sustainably higher, unless these headlines come to some actual conflicts," said Ryan McKay, commodity strategist at TD Securities in Toronto. Spot gold was up 0.02 percent at $1,276.61 an ounce by 2:17 p.m. EDT (1817 GMT), after hitting $1,271.11, the lowest since Oct. 6.
US gold futures for December delivery settled up 70 cents, or 0.05 percent, at $1,279 per ounce. In other precious metals, silver was down 0.06 percent at $16.93 an ounce. Platinum was down 0.22 percent at $917.99 an ounce and palladium was down 0.3 percent at $959.22 an ounce.