Gold steady as Fed minutes dampen rate hike expectations

By Peter Hobson

LONDON (Reuters) - Gold was steady on Thursday after the minutes of the latest Federal Reserve policy meeting further dampened expectations for an interest rate hike next month, lowering U.S. bond yields and stalling upward momentum in the dollar.

The dollar edged marginally higher versus the euro on Thursday, but remained off the previous session's one-week highs.

Spot gold was flat at $1,237.61 per ounce at 1120 GMT, while U.S. gold futures rose 0.4 percent to $1,238.8.

"The dollar's backed off, bond yields have backed off, and that's given a bit of support for gold," said Robin Bhar at Societe Generale.

A weaker dollar makes gold cheaper for holders of other currencies, while lower yields reduce the opportunity cost of holding non-yielding bullion. Higher interest rates would lift yields.

Gold prices have traded within a range of around $1,220-$1,240 since early February.

Unease over the political outlook in the United States and Europe has supported demand for bullion as a safe-haven asset, but the prospect of rising interest rates has kept a lid on gains.

Investors were looking ahead to an address by U.S. President Donald Trump to Congress on Feb. 28 that could force gold out of its trading range.

"Currencies, the bond market, gold, will all take their cue from what he says on Tuesday," said Bhar.

More details on promised government spending, infrastructure investment or tax cuts would likely push the dollar and U.S. asset prices higher and gold lower.

"Should Trump become the feared 'unguided missile', which we still believe is unlikely, safe-haven demand would increase even more," Julius Baer analyst Carsten Menke said in a note.

Technical analysts at Reuters and ScotiaMocatta said gold was likely to break above its recent range.

"A push above $1,240-$1,245 will be required to entice fresh interest," Sam Laughlin at MKS PAMP said in a note.

In other precious metals, silver was down 0.3 percent to $17.97 an ounce. Platinum was 0.9 percent lower at $993.26 an ounce, and palladium was down 0.4 percent at $765.75.

(Additional reporting by Arpan Varghese; Editing by Mark Potter)