Gold steadied as positive US economic data and prospects of tighter monetary policy offset limited gains from safe haven buying.
Spot gold was up by as much as 0.1 per cent at $US1,197.87 an ounce overnight.
US gold futures settled down $US1.30, or 0.11 per cent, at $US1,201.60.
Earlier in the session, prices broke above the key $US1,200 level as a slide in stock markets on the back of rising US Treasury yields prompted some investors to seek refuge in the precious metal.
‘The US economy is still in a very good place,’ said Nicholas Cawley, an analyst at DailyFX.com.
‘The expectations of a rate hike next year is tilting toward four from three,’
‘The higher the rates, the more attractive for investors looking for safe haven to move into US Treasuries than gold.’
About half of the Fed’s policymakers, including Chairman Jerome Powell, used public appearances on Wednesday to show an increasingly unified view that the US economy was not headed for any obvious potholes.
Higher US interest rates draw investors to the dollar, boosting its value and in turn making assets priced in the US unit more expensive for holders of other currencies.
The US dollar held near recent highs against the euro and yen, as investors evaluated the impact of a global government bond rout that has lifted benchmark US Treasury yields to seven-year peaks.
Kitco Metals senior analyst Jim Wyckoff said some investors had turned to gold as a hedge against inflation risk.
Gold has fallen about 12 per cent since hitting a peak in April, under pressure from a strong dollar, which has been boosted by a vibrant US economy, rising interest rates and fears of a global trade war.
The retreat in the stock markets have made investors a little cautious about overall economic growth in the United States, said Jeffrey Christian, managing partner of CPM Group.
‘There is a little bit of shift (of money to gold).’
Investors are awaiting US non-farm payrolls numbers due on Friday, with a Reuters survey showing economists on average expect a rise of 185,000 in September after a jump of 201,000 in August.
‘Expectations are that it (non-farm payrolls figure) is going to be a bumper. It should underpin the dollar strength. I can’t see any fundamental reason to buy gold above other haven assets,’ Cawley said.
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, dropped 0.8 per cent on Wednesday, having declined more than 4.5 million ounces since late April.
Meanwhile, spot silver slipped 0.1 per cent to $US14.56. Palladium was 0.1 per cent lower at $US1,054.22, while platinum was up 0.2 per cent at $US823.30.