In the Mumbai bullion market, the yellow metal saw a gain of rs 19 in prices to Rs 38,450 per 10 gram of 24-carat gold (plus 3 percent GST), on the back of festive demand. (Image: Reuters)
Gold held steady on Thursday, after hitting an eight-week low in the previous session, as the Federal Reserve minutes released on Wednesday showed the central bank was split on how inflation might affect the future pace of interest rate hikes.
Spot gold was nearly flat at $1,226.70 per ounce at 0421 GMT. It touched $1,217.14 in the previous session, its lowest since May 10.
U.S. gold futures for August delivery gained 0.4 percent to $1,226.40 per ounce.
"The FOMC meeting minutes gave some strength to gold in the previous session through the dollar's weakness," said Yuichi Ikemizu, Tokyo branch manager at ICBC Standard Bank, adding that "(investors) used this opportunity to buy back their positions."
The details of the June 13-14 meeting, at which the Fed voted to raise interest rates, showed several officials wanted to announce a start to the process of reducing the Fed's large portfolio of Treasury bonds and mortgage-backed securities by the end of August but others wanted to wait until later in the year.
"There were split opinions on the timing of the balance sheet tapering and the market took this to be a bullish factor," said Ikemizu.
Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.
U.S. data on tap later in the day includes the ADP employment report, ISM non-manufacturing PMI and the initial jobless claims.
Investors will also look to comments from San Francisco Fed President John Williams and Fed Board Governor Jerome Powell.
In the wider markets, most Asian stocks fell and the dollar steadied.
"With the dollar relatively steady and U.S. equities firm, we suspect that the short-term direction for gold will be lower still," said INTL FCStone analyst Edward Meir.
"The precious metal seems to be having trouble moving higher and geopolitical tensions (specifically with North Korea) do not seem to be much of a help," he added.
The United States cautioned it was ready to use force if need be to stop North Korea's nuclear missile program but said it preferred global diplomatic action against Pyongyang for defying world powers by test launching a ballistic missile that could hit Alaska.
Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.66 percent to 840.67 tonnes on Wednesday.
Among other precious metals, silver rose 0.1 percent to $16.10 per ounce. In the previous session, it hit a low of $15.84 an ounce, its lowest since Dec. 30.
Platinum fell 0.5 percent to $905.65 per ounce after hitting an over eight-week low in the previous session, while palladium advanced 0.1 percent to $841.00 per ounce.