Gold slips on upbeat risk sentiment as inflation fears ebb

Gold prices fell on Tuesday as risk appetite improved after U.S. Federal Reserve officials calmed down inflation worries among investors, although the metal’s losses were limited by a subdued dollar and bond yields.

Spot gold slid 0.3% to $1,876.24 per ounce by 0250 GMT. U.S. gold futures fell 0.4% to $1,876.30 per ounce.

“The sentiment pendulum swung back to the bullish side overnight, after a procession of Federal Reserve officials talked down inflation risks. That led to a broad-based recovery in equity markets and has seen gold’s momentum temporarily halted,” OANDA senior market analyst Jeffrey Halley said.

“Gold’s critical support level lies around $1,845 an ounce, its 200-day moving average. As long as it holds above there, the uptrend remains intact.”

St. Louis Fed President James Bullard said he expects the inflation rate to be above 2% both this year and the next but several Fed officials, including Bullard, continued to support the central bank’s policy in separate remarks.

Asian shares climbed in early trade, tracking a Wall Street rally overnight, as investors tempered fears about inflation-driven rate hikes.

Meanwhile, Bitcoin jumped more than 10% during a surge in cryptocurrencies on Monday, regaining some ground lost due to a sell-off over the weekend.

Offering some respite to gold, the dollar was languishing near four-month lows against major currencies, while U.S. Treasury long-dated yields fell to two-week lows.

Lower bond yields reduce the opportunity cost of holding non-interest bearing gold.

Holding of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.3% to 1046.12 tonnes on Monday from 1042.92 tonnes on Friday.

Elsewhere, palladium rose 0.5% to $2,741.19 per ounce, after falling to a one-month low on Monday.

Silver fell 0.7% at $27.60 per ounce, while platinum was steady at $1,174.