Gold ticked higher in Asian trade on Wednesday following recent steep losses, as markets waited on minutes from the November Federal Reserve policy meeting amid expectations of an interest rate hike in December.
Bullish homes sales data has added to signs of an improved US economic outlook, with federal funds futures implying traders are pricing in a 100 per cent chance of a December rate rise, according to the CME Group’s FedWatch Tool.
Spot gold rose 0.2 per cent to $1,214.68 an ounce by 0302 GMT. In the previous session, the metal eased 0.15 per cent, hurt by strong equities.
US gold futures rose 0.3 per cent to $1,214.40 per ounce.
“There is constant buying from India and China as prices have dropped considerably and there is no aggresive selling,” a trader with a Chinese bank said, noting the metal has fallen more than $120 an ounce since November 9.
However, analysts cautioned that higher interest rates and a more positive sentiment in equity markets could weigh further on gold prices.
Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.
“The risk-on sentiment continues to prevail in the market and gold prices will not be able to perform,” said Helen Lau, analyst at Argonaut Securities in Hong Kong.
“People would want to participate in the equity rally and consolidate their gold positions. Rising treasury yields too would make gold unattractive.”
While Trump’s US presidential victory has spurred safe-haven buying of physical gold in Europe, traditional bullion holders in the United States are standing pat.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.42 per cent to 904.91 tonnes on Tuesday.
“It seems that there is little on the horizon that could materially change the bearish trifecta comprising of a stronger dollar, higher US rates and US equities,” INTL FCStone analyst Edward Meir said in a note.
“These are formidable headwinds for gold to get through and as a result, we suspect that the precious metal will be under further pressure, likely taking out $1,200 support in fairly short order,” Meir added.
Spot gold looks neutral in a range of $1,204-$1,222 per ounce, and an escape could indicate a direction, according to Reuters technicals analyst Wang Tao.
Silver rose 0.4 per cent to $16.70 an ounce and platinum was 0.4 per cent higher at $940.85.
Palladium rose 0.4 percent to $742.68, after touching its best since early June at $749.40 in the previous session.