Spot gold was down 0.1% at $1,311.56 an ounce by 8.04am. It declined 0.6% on Tuesday, in its biggest one-day drop in a month. US gold futures were down 0.1% at $1,312.50 an ounce on Wednesday.
Benchmark US Treasury yields hit a 10-month high on Tuesday after the Bank of Japan tweaked its bond-buying programme. Wall Street’s major indexes extend the New Year rally to record levels into a sixth day on Tuesday, but Asian shares slipped on Wednesday on profit-taking.
“We are wary about going long on gold at these levels… The spike in US treasury yields is an obvious negative, as is the fact that the dollar is now quite oversold against a number of currencies,” said INTL FCStone analyst Edward Meir. “We are particularly concerned by the latest CFTC data showing dollar short positions at multi-year highs and so a short-covering rally cannot be ruled out.”
A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies.
The dollar index, which tracks the greenback against a basket of six major rival currencies, was down 0.1% at 92.423. It touched a more than one-week high at 92.640 on Tuesday.