Gold was steady near $1,255 an ounce on Wednesday, holding close to a three-month low, as speculation over an early US interest rate hike strengthened the dollar and dulled the bullion’s appeal.
Spot gold was little changed at $1,256.49 an ounce by 0338 GMT. It fell to $1,247.15 on Tuesday, its lowest since June 6, before paring losses to close up 0.04 percent.
The dollar index was holding near 2013 highs on Wednesday, after a Federal Reserve study was interpreted as suggesting that investors were off in their estimates of how long it would take the US central bank to hike rates.
The research published on Monday heightened expectations that the Federal Reserve could signal a hike in interest rates at a policy-setting meeting next week on September 16-17.
“The strong dollar may have a further impact on gold and other commodities,’’ said Mark To, head of research at Hong Kong's Wing Fung Financial Group.
“It does look like the market thinks an early rate hike is very likely based on economic data. The immediate support for gold is at $1,240 but it could go all the way to $1,200.’’
Higher rates would dim the appeal of non-interest yielding assets such as bullion. Data on Tuesday showed that US job openings held near a 13-year high in July while hiring picked up.
Easing geopolitical tensions
Easing geopolitical tensions over the Ukraine crisis also curbed some safe-haven appetite for gold.
A ceasefire between Ukraine and pro-Moscow rebels was agreed on Friday, part of a peace plan meant to end a five-month conflict that has killed more than 3,000 people and caused the sharpest confrontation between Russia and the West since the Cold War.
But caution persisted as the Ukrainian military has said five of its servicemen have been killed in the past four days.
“As fragile as the truce may be, the overall sentiment appears to be satisfied that the worst of the crisis is over,’’ Phillip Futures analyst Howie Lee said in a note.
“With a climbing dollar and the equity index showing itself to still have some gas in the tank left to continue its upward trend, investor demand for gold has been decreasing.’’