LONDON: Gold clawed higher on Thursday as US Treasury yields and the dollar eased while palladium extended its outperformance over sister metal platinum.
"A lot of what's been driving gold has been the US bond market and we've seen rates stabilise now," said analyst Tom Kendall at ICBC Standard Bank in London.
"I think the overreaction in fixed-income markets is coming to an end, and that means that the sell-off and overreaction in gold is also coming to an end."
Spot gold has shed about 4 percent since the US election and slid 11 percent since touching a two-year peak of about $1,375 in early July.
Spot gold was up 0.4 percent at $1,230.27 an ounce at 1135 GMT, after dropping 0.25 percent in the previous session.
US gold futures rose 0.5 percent to $1,229.80 an ounce.
US Treasury yields eased on Thursday as a week-long surge that followed Donald Trump's shock US election win subsided further, dragging the dollar off a 13-1/2-year peak.
Weighing on gold have been expectations the US Federal Reserve will hike rates next month, but this is now largely priced into gold, Kendall added.
Gold is highly sensitive to interest rates.
Fed Chair Janet Yellen's congressional testimony is due later in the day and will be watched closely for clues on the economic outlook and rate increases.
Also supporting gold is a pick-up in demand in India after the withdrawal of high-denomination banknotes.
Among other precious metals, palladium rose 0.6 percent to $719.50, coming close to Wednesday's six-week high, while platinum was down about 0.4 percent at $940.30.
Palladium has sharply outperformed its sister metal recently with the spread between the two metals sliding to $225 from $377 over the past two weeks.
Kendall said the weak fundamentals for platinum supported the move, highlighted in a report earlier this week from refiner Johnson Matthey which said the platinum market could return to surplus for the first time in six years in 2017.
"It's getting to the point where you think maybe things need to pause for a while, but certainly it's very hard to make a case why anyone should be preferring to invest in platinum versus palladium if they've got an investment horizon of less than a year or so," he added.
Silver rose 0.4 percent to $17.04 an ounce.
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