SINGAPORE: Gold hovered near three-week lows on Thursday as the US dollar jumped on expectations the Federal Reserve could end its bond-buying programme this fall, hurting the metal's safe haven appeal as a hedge against inflation.
Although concerns about the Ukraine crisis could lend support, the bullion market was suffering from a lack of physical buying from top gold consumer China following a sharp drop in its currency.
Janet Yellen, speaking at her first news conference as the Fed chief after the close of the US central bank's two-day policy meeting, said the central bank could start to raise interest rates around six months after its current asset purchase programme ends.
"Physical demand is still very quiet and slow. The market may recover and rally from here but the upside will be limited," said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong, who pegged resistance at $1,340 and $1,350 an ounce.
Gold could still fall back to about $1,300 an ounce, said Fung, adding that sentiment was mixed as a move by the Fed to reduce bond-buying could overshadow the impact from tensions in Ukraine. Cash gold hit a low of $1,325.34 an ounce, its weakest since Feb. 28, and stood at $1,333.31 by 0346 GMT, up 0.19 percent on short-covering. It briefly rose to a six-month top of $1,391.76 on Monday on tensions in Ukraine and concerns about growth in China.
The United States warned Moscow it was on a "dark path" to isolation on Wednesday as Russian troops seized two Ukrainian naval bases, including a headquarters in the Crimean port of Sevastopol where they raised their flag.
US gold for April delivery was at $1,334.00 an ounce, down 0.54 percent, having earlier hit $1,326.10, its lowest since the end of February.
The US dollar was holding hefty gains in Asia on Thursday as investors wrestled with the risk that US interest rates could rise sooner and faster than previously thought, pressuring stock and bond prices.
In the physical market, premiums for gold bars in Hong Kong were unchanged from last week at $1 an ounce to the spot London prices, and at 80 cents to $1 in Singapore.
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