Gold prices dipped slightly on Tuesday, hovering not far off a 2018 low struck in the previous session as a firm dollar near five-month highs and optimism in global markets curbed appetite for the precious metal. Spot gold was down 0.2 percent at $1,290 per ounce, as of 0614 GMT. In the previous session, it slid to $1,281.76, its lowest since Dec. 27. US gold futures for June delivery slipped 0.1 percent to $1289.8 per ounce.
"I think the overriding narrative here is where the dollar is going," said Stephen Innes, APAC trading head at OANDA. Abating geo-political risk was also weighing on sentiment for gold, he added. Expectations that the Federal Reserve will lift US interest rates again next month added to downward pressure on gold. Higher US rates tend to boost the dollar and push bond yields up, make non-yielding assets like bullion less attractive.
Accelerating inflation means the Fed should hike interest rates two or possibly three more times this year, and could move as soon as next month, Philadelphia Fed President Patrick Harker said on Monday. "Somewhere around the $1,275 level we are going to start to attract more bullish sentiment, but in the mean time the driver is going to remain the US dollar," Innes said. Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.38 percent to 852.04 tonnes on Monday.