Gold near 8-month high as dovish Fed minutes weigh on dollar, yields

Gold prices held ground on Thursday near an eight-month high touched earlier this week, as the U.S. dollar and Treasury yields dipped after Federal Reserve minutes showed a less hawkish-than-feared stance.

Spot gold was flat at $1,868.09 per ounce, as of 0331 GMT, hovering near its June high of $1,879.48 hit on Tuesday.

U.S. gold futures were down 0.1% at $1,870.30.

"Gold has been range-bound between $1,845 and $1,880, and should remain here until either geopolitical tensions have eased a little, or the Fed commits to show that they are really still looking to remove liquidity and raise interest rates faster," said Brian Lan, managing director at dealer GoldSilver Central.

However, with high inflation, "even if they raise interest rates, real interest rates will still be largely negative," Lan cautioned. Hence, after an initial knee-jerk reaction to a hike, investors will realise that "gold is still a good asset to hold in this environment."

Fed officials last month agreed that with inflation tightening its grip on the economy and employment strong, it was time to raise interest rates, but also that any decisions would depend on a meeting-by-meeting analysis of inflation and other data, according to the minutes of the Jan. 25-26 policy meeting.

Higher yields and interest rates tend to increase the opportunity cost of holding non-interest-paying bullion.

The dollar eased after the dovish minutes, making gold more attractive to overseas buyers, while a slight dip in U.S. Treasury yields also supported bullion.

The market is really sensitive to news flow around the geopolitics of Ukraine and Russia, said Nicholas Frappell, a global general manager at ABC Bullion, adding that the risk-off approach had reasserted itself and supported gold.

Spot silver fell 0.5% to $23.42 per ounce, platinum dipped 0.3% to $1,058.84, while palladium rose 0.2% to $2,284.22.

(Reporting by Bharat Govind Gautam in Bengaluru; Editing by Sherry Jacob-Phillips)