Gold prices were flat on Thursday, slumping early on concern about rising US bond yields and global interest rates, but buyers emerged to lift bullion when it hit a technical support level at about $1,312 an ounce. While a strengthening US dollar weighed on gold during the recent global stock market sell-off, more investors decided to buy bullion later, when prices touched the support level, said Michael Matousek, head trader at US Global Investors.
"Gold came into support at $1,312 and bounced right from there," Matousek said. "That support comes back from the late-December and early-January level and the level from October," Matousek added. Between late December and early January, gold prices rallied, reaching their highest in 1-1/2 years at $1,366.07, largely on dollar weakness.
Spot gold was unchanged at $1,318.12 per ounce by 1:53 p.m. EST (1853 GMT), up off the session low of $1,306.81, its lowest since Jan. 2. US gold futures for April delivery settled up $4.40, or 0.3 percent, at $1,319 per ounce. In early trade, inflation-linked US bond yields crept up close to four-year highs after the Bank of England signaled more aggressive rate hikes. This fed concern that central banks around the world will raise interest rates.
"The increase in real bond yields has been pressuring gold, on top of the rebound we have seen in the dollar," said Julius Baer analyst Carsten Menke. A stronger dollar makes dollar-denominated bullion more expensive for users of other currencies. Higher interest rates reduce the attraction of non-yielding gold.
Analysts polled by Reuters said they did not expect the dollar to rebound this year, despite expectations of at least three rate rises. The dollar later turned flat. Adding to the pressure were comments by Federal Reserve officials that stock market turbulence was unlikely to derail US rate hikes this year and that the economy remains strong.
Meanwhile, silver increased 0.4 percent at $16.43 an ounce after touching $16.22, the lowest since Dec. 22. Platinum declined 0.4 percent at $976.30 per ounce, after touching a one-month low at $965. Palladium dropped 1.9 percent at $965.90 an ounce after reaching its lowest since Oct. 31 at $964.22.
Palladium fell below technical support at its 55-day moving average and broke an eight-month uptrend, Commerzbank analysts said. The metal, used in catalytic converters to control vehicle emissions, rose 56 percent last year and to an all-time high in January.