Gold held steady after a five-day rally, as investors turned their attention to the Federal Reserve's interest rate path ahead of this week's annual Jackson Hole meeting.
The precious metal edged down slightly to around $4,650 an ounce, moving away from its three-month high reached in the previous session. However, it remains up about 7% over the past week, supported by the U.S. Treasury's unexpected intervention in the bond market.
Recent efforts to control the cost of U.S. debt have revived interest in what is known as currency devaluation trading, which helped drive gold's record rise last year, when investors bought the precious metal and avoided sovereign debt and currencies to protect themselves from runaway budget deficits.
The notable recovery in gold in recent weeks has also pushed the metal above its 200-day moving average, often seen as a key indicator of momentum. In a sign of broad investor participation, gold-backed exchange-traded funds tracked by Bloomberg added more than 28 tons last week, the largest amount since January.
TD Securities analysts Ryan McKay and Bart Melek wrote in a note: “Precious metals are finding comfort in this higher range, while noting the limited potential for short-term gains due to rising energy prices and persistent inflation risks. We caution that this rally may be too early to trigger a renewed push towards record highs.”
US inflation data in focus
Investors will be looking for clues about the Federal Reserve's approach to inflation when Kevin Warsh delivers his first major speech as central bank chair on Friday. The highly anticipated address at the Jackson Hole symposium gives Warsh an opportunity to respond to criticism that he has not been forthcoming about his views on the economy.
Suzanne Collins, president of the Federal Reserve Bank of Boston, said she supports keeping interest rates unchanged for now, provided there is progress in bringing inflation back toward the central bank's 2% target. High borrowing costs typically put pressure on gold, which does not offer a yield.
Inflation fears eased on Tuesday, with Treasury yields falling between five and seven basis points across the yield curve, and oil prices declining amid optimism about de-escalation in the Middle East.
Crude oil continued its decline after Iran and Oman held talks on establishing a temporary joint maritime corridor that would allow some shipping traffic to resume through the Strait of Hormuz.
Traders are also preparing for the release of the US personal consumption expenditures index on Wednesday, which will provide further indications of the state of the US economy.
Latest price movements
Gold fell 0.3% to $4,643.89 an ounce at 9:30 a.m. Singapore time. Silver declined 0.1% to $68.58 an ounce.
Platinum and palladium rose, and the Bloomberg Dollar Spot Index, a measure of the US currency, climbed 0.1%.
