Fed's rate-hike bets cap advance

According to Mining News Pro - Spot gold was up 0.3% at $1,791.91 per ounce, as of 0636 GMT. U.S. gold futures rose 0.1% at $1,800.20.

The dollar index inched 0.3% lower as the yen surged after the Bank of Japan (BOJ) said it would review its yield curve control policy. A weaker dollar makes gold more attractive to overseas buyers.

The BOJ’s announcement surprised markets during thin trade, and as a result gold has sucked up safe-haven flows after the dollar weakened, said Matt Simpson, a senior market analyst at City Index.

However, “the prospects of a higher terminal Fed rate could prevent gold enjoying a runaway rally next year”.

Last week, Fed Chair Jerome Powell said the U.S. central bank will deliver more rate hikes next year to curb inflation. Other major central banks have also highlighted a similar hawkish stance. Although gold is considered an inflation hedge, higher rates increase the opportunity cost of holding the asset.

European Central Bank Vice-President Luis de Guindos signalled the bank was determined to keep raising interest rates.

Investors also took stock of news that in top bullion consumer China, COVID-19 is sweeping through trading floors in Beijing and spreading fast in the financial hub of Shanghai. The country reported five new COVID deaths for Dec. 19.

“If China brings back restrictions and if that were to happen over the holiday period, it is the perfect catalyst for large moves (in gold) to the downside,” Simpson added.

Spot silver edged 0.4% higher at $23.04, platinum gained 0.4% to $983.25 and palladium was up 1% at $1,685.16. (Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Rashmi Aich and Sherry Jacob-Phillips)