Gold edges down on firmer dollar after Fed cranks up rates

Gold prices inched lower on Thursday, as the dollar recovered slightly after a large but widely expected interest rate hike by the US central bank sent the currency tumbling in the previous session.

Spot gold fell 0.1 per cent to $1,831.29 per ounce, as of 0546 GMT, while US gold futures rose 0.7 per cent to $1,832.60.

The conflicting currents of support from potential safe-haven demand and inflationary hedge buying versus pressure from a higher interest rate regime are keeping gold prices balanced, said Michael McCarthy, chief strategy officer at Tiger Brokers, Australia.

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Higher short-term US interest rates and bond yields increase the opportunity cost of holding bullion, which yields no interest.

The US Federal Reserve on Wednesday approved a 75-basis-point interest rate hike, its largest in more than a quarter of a century, to stem a surge in inflation, and flagged a slowing economy.

"Gold has been remarkably range-bound for weeks now (despite major news)... and it's a real head-scratcher for traders at the moment to work out what exactly will drive gold out of this range," McCarthy said, adding the dollar's overall upward trend presented a cautious outlook for gold.

The Fed's announcement drove longer-dated US government bond yields lower and nudged the dollar off two-decade peaks, which took gold as much as 1.9 per cent higher in the previous session.

Meanwhile, Asian stocks rose on Thursday, carrying momentum from a global equities rally overnight. However, key investors with big positions in gold know that the economic outlook is still challenging and still prefer to hold bullion as a safe-haven asset, said Brian Lan, managing director at dealer GoldSilver Central. Spot silver was flat at $21.64 per ounce, platinum fell 0.1 per cent to $938.59, and palladium dipped 0.2 per cent to $1,857.72.