Gold drifted away from two-week lows on Wednesday as the dollar surrendered some gains, but analysts said bullion is unlikely to rise sharply ahead with losses in the greenback seen limited.
Appetite for gold appeared to have eased after the metal failed to convincingly breach the $1,300 resistance level last week. But it was still up nearly 20 per cent for the year as expectations for a near-term increase in US interest rates have faded.
Spot gold was up 0.3 per cent at $1,269.20 an ounce by 0333 GMT, after touching a low of $1,257.25 on Tuesday, its weakest since April 28.
The dollar slipped versus a basket of major currencies , making dollar-priced assets such as gold cheaper for holders of other currencies. Weaker Asian equities also helped gold.
Mark To, head of research at Wing Fung Financial Group in Hong Kong, said that the $1,300-$1,400 level would be a reasonable price range for bullion for the rest of the quarter.
Gold is supported largely by expectations that the next US interest rate increase will only happen later in the year as Fed policymakers take note of challenging global economic conditions, he said.
“The current situation is favourable to gold but it is not overwhelmingly favourable,” said To, adding that the US economy appears to be in good shape overall.
“That’s why people take some profits along the way.”
US gold for June delivery gained 0.5 per cent to $1,271.20 an ounce.
“Looking ahead, we see limited upside for gold pricing given the limited room for the Fed to surprise to the downside, limited room for the dollar to depreciate, and limited room for China to drive (emerging markets) currency strength to contribute to dollar weakness,” Goldman Sachs said in a report.
Other precious metals also advanced, with spot silver gaining 0.7 per cent to $17.22 an ounce, platinum up 0.5 per cent at $1,051.48 and palladium 0.4 per cent higher at $593.50.