Gold little changed; firm dollar, USA rate outlook weighs

Sets of gold bangles are displayed in a showcase of a showroom selling bridal jewellery in Peshawar

Higher interest rates tend to boost the dollar and push bond yields up, making greenback-denominated gold more expensive for other holders and denting its non-yielding appeal.

Gold prices recovered slightly due to short-covering on Wednesday, after Tuesday's slide to the lowest level this year, thanks to surging U.S. bond yields and a stronger dollar. "The slight pickup suggests that there might have been some opportunistic buying on the part of investors", said John Sharma, an economist with National Australia Bank.

Spot gold rose 0.3 per cent to $1,293.89 per ounce at 0330 GMT, after shedding 1.7 percent and marking the lowest this year at $1,288.31 in the previous session.

A stronger dollar makes greenback-denominated gold more expensive for holders of other currencies, while rising USA yields tend to weigh on bullion's non-yielding appeal.

Treasury yields surged higher after April retail sales came in as expected with a 0.3% month-over-month increase, but the March increase was revised higher to 0.8% from 0.6%, and core retail sales jumped 0.4%.

Yields and the dollar are likely to rise further, pushing gold to US$1,275 by the end of June and US$1,250 by year end, below the US$1,310-US$1,360 range it has inhabited since January, said ABN AMRO analyst Georgette Boele.

Among the S&P industry groups, the rate-sensitive real estate space ended at the bottom of the standings with a 1.7% loss, including a 3.8% rout in the iShares U.S. Home Construction ETF.

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Investors largely disregarded news that North Korea had called off high level talks with South Korea due on Wednesday, less than a month before a planned summit between Kim Jong Un and US President Donald Trump.

"The market is getting increasingly disappointed about (gold's) inability to react to those (geopolitical) drivers", said Ole Hansen, head of commodity strategy at Saxo Bank.

While global political tensions continued to provide safe-haven support to the metal, investors said the main price drivers would likely remain a stronger dollar and rising USA interest rates.

Higher interest rates in the United States and a rising dollar would continue to add downward pressure on gold, Lau said.

As for other precious metals, silver for July delivery went down 37.6 cents, or 2.26 percent, to settle at 16.269 dollars per ounce.

Platinum was up 0.1 percent at $904 per ounce, while palladium fell 2 percent to $975.72 an ounce, after dropping to a more than one-week low at $964.

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