Gold steadies near $1,200 as equity jitters subside

Reuters: Gold steadied near $1,200 an ounce on Wednesday, rolling back earlier gains, as a rise in European stocks pointed to a retreat in the risk aversion that drove prices to one-year highs last week.

Uncertainty over the outlook for global equities and for US monetary policy kept the metal underpinned, however.

Spot gold was at $1,201.69 an ounce at 1020 GMT, up 0.1% but off an earlier high of $1,212.20. US gold futures for April delivery were down 0.5% at $1,202.40.

Spot prices peaked at $1,260.60 an ounce last week after rallying $200 in less than a month.

“It was unusual to see that intensity of that run-up higher,” Mitsubishi precious metals analyst Jonathan Butler said. “Gold was pretty overbought on a short-term relative strength index basis.”

“Once we saw the slight uptick in the dollar over the last couple of days, and equity markets started to get a bit of a bid again, the natural thing was for this safe-haven trade to start to unwind.”

Investors will be closely watching the minutes of the Federal Reserve’s latest policy meeting for clues on the expected pace of US rate hikes this year.

Speculation has increased in recent days that the US central bank might resort to negative interest rates to stimulate the economy after Fed Chair Janet Yellen said last week it was an option that would not be taken “off the table”.

Gold is sensitive to higher US rates, which boost the opportunity cost of holding non-yielding gold. Expectations for rising rates helped push gold down 10% last year.