Gold steadied on Thursday as a weaker dollar and lower U.S. yields lent support, with investors wagering that policy tightening in the United States would be glacial at best, though gains were capped by surging global stock markets.
The dollar was steady against a currency basket, having fallen to its lowest since last October after U.S. Federal Reserve Chair Janet Yellen struck a less hawkish than expected tone in testimony before Congress on Wednesday.
A weaker U.S. currency makes dollar-priced gold cheaper for non-U.S. investors. Denting gold's safe-haven appeal, however, the MSCI world index hit a record high for the fourth time in less than a month as investors took Yellen's remarks as a green light for risk-taking.
"Risk off is what we need for gold to really come to life. When stock markets do fall, which I think is only a matter of time, then we'll see gold rise sharply," said Forex.com analyst Fawad Razaqzada. "Until then it's still a range-bound market."
Spot gold slid 0.12 percent to $1,217.98 per ounce.
U.S. gold futures for August delivery slid settled at $1,217.30 per ounce.
The U.S. economy is healthy enough for the Fed to raise interest rates, though low inflation and a low neutral rate could leave the central bank with diminished leeway, Yellen said on Wednesday.
The comments, part of her two-day monetary policy testimony, prompted a rally in treasuries, with yields on two-year notes falling to three-week lows. Lower yields reduce the opportunity cost of holding non-yielding bullion.
"The consolidation around $1,220 should be viewed as positive for near-term pricing, with the relatively light long positioning instilling confidence in the market that the metal is open to further top-side moves," MKS said in a note.
"Geopolitical concerns out of the Korean peninsula are likely to supportive for the broader precious complex, while the very fluid Trump-Russia collusion story continues to create uncertainty across markets."
Among other precious metals, silver dipped 0.2 percent to $15.85 an ounce.
"Interestingly, the gold/silver ratio is approaching 80, meaning that silver is very inexpensive compared with gold and is a particularly good bargain," said Gregor Gregersen at Singapore-based Silver Bullion Pte.
Palladium was flat at $863.25 per ounce. Platinum fell 0.5 percent to $910.75, adding to the previous session's 1.7 percent gain, its biggest since June 2.