Gold slips as US Federal Reserve officials hint at possible 'taper' talks

Gold prices inched down on Thursday after touching over four-month highs in the previous session as 'tapering' talk from the US Federal Reserve bolstered the dollar and Treasury yields, weighing on non-yielding bullion. Spot gold was down 0.2 per cent at $1,868.52 per ounce by 0936 GMT. US gold futures fell 0.7 per cent to $1,869.10.

Fed minutes published on Wednesday showed "a number" of officials thought that if the recovery holds up, it might be appropriate to "begin discussing a plan for adjusting the pace of asset purchases".

Chatter about tapering has impacted the sentiment in gold markets, said ABN Amro analyst Georgette Boele.

"Now we are at crucial resistance levels from a technical point of view ... We still expect a higher dollar and modestly higher real yields, which should push gold lower again." Gold prices rose more than 1 per cent on Wednesday to their highest since January 8, but pared most of the gains as the dollar index bounced off from a near three-month low and benchmark US Treasury yields jumped after the Fed minutes.

An increase in rates from the Fed will take the sheen off bullion's appeal as it translates into higher opportunity cost of holding the non-yielding asset.

"As we project a recovery of global growth, we see downside rather than upside for gold and silver prices even though inflation may overshoot in the short term," Julius Baer analyst Carsten Menke said in a note.

Spot gold may retest a resistance at $1,893 per ounce, according to Reuters technical analyst Wang Tao.

Palladium fell 0.8% to $2,487.31 per ounce, silver dropped 0.7% to $27.55, while platinum rose 0.6% to $1,198.