Gold steadies in European trade

Nervous investors looked for new signals on whether US interest rates would rise in March and on US President Donald Trump's tax plans as gold held steady on Wednesday. "We see the risks as pretty binary in the gold market," Carsten Menke, commodities research analyst at Julius Baer in Switzerland, said. "We still think the FOMC will go for a rate hike in March, which is not yet priced in, so we could see quite a bit of a setback towards $1,200 or below."
Traders are awaiting the minutes from the US Federal Reserve's last meeting, due at 1900 GMT on Wednesday. "On the other hand, if Trump comes along with more tweets or executive orders, than we might well see more (investment) inflows," Menke said, suggesting the purchase of out-of-the-money call options. Spot gold had edged up 0.3 percent to $1,239.71 per ounce by 1330 GMT, while US gold futures added 0.1 percent to $1,240.50. Spot gold dropped as much as 1 percent to touch a one-week low of $1,225.73 in the previous session.
"Uncertainty is running higher than it's ever been, and that's probably what's driving gold...along with inflation," said Ross Norman, CEO of Sharps Pixley. "The key thing is that geopolitics and inflation have nudged themselves to the top of the queue as the key drivers of gold," said Ross Norman, CEO of Sharps Pixley. The US dollar, which was boosted by hawkish comments from various Fed officials in the previous session, was firm on Wednesday.
Philadelphia Fed President Patrick Harker suggested he would support an interest rate increase at a mid-March policy meeting as long as inflation, output and other data until then continue to show the US economy is growing. Gold is highly-sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion, while also boosting the dollar.
"Our economists expect three rate hikes in 2017 and see the probability of a rate hike by June at 80 percent, and we see US long dated real rates rising slightly, placing downward pressure on gold," Goldman Sachs said in a note. Investors were also awaiting an address by Trump to Congress due next week at which he is expected to announce tax policies. Among other precious metals, spot silver gained 0.5 percent to $18.03 an ounce. Platinum rose 0.6 percent to $1,004.80, while palladium dipped 0.2 percent to $777.60.