Gold prices edged down 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 0.2 percent at $1,310.16 an ounce by 0708 GMT. It declined 0.6 percent on Tuesday, in its biggest one-day drop in a month.
US gold futures were down 0.2 percent at $1,310.80 an ounce on Wednesday. "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.
Higher rates could dent demand for non-interest-paying gold. Spot gold may be range-bound between $1,305 and $1,313 per ounce, as suggested by a Fibonacci retracement analysis, according to Reuters technical analyst Wang Tao.