Gold fell to a seven-week low on Tuesday then pared losses after Federal Reserve Chair Janet Yellen said the central bank is preparing to consider interest rate hikes on a "meeting-by-meeting basis."
Yellen said the Fed's rate-setting policy committee will likely first remove the word "patient" in describing its approach to rate hikes, then enter a phase in which rate hikes are possible at any meeting.
Spot gold initially fell about 0.8 percent to a seven-week low of $1,190.91 per ounce as the U.S. dollar rose, then eased, down 0.1 percent to $1,199 an ounce. U.S. gold futures for April delivery settled down $3.50 an ounce at $1,197.30.
"The initial negative was the shift in emphasis. Whereas the Fed's last statement showed a fair (sized) bloc worried about raising rates prematurely, Yellen seemed to be laying the groundwork for an increase, at least in the first part of the testimony," said Peter Buchanan, senior economist for CIBC World Markets in Toronto.
Gold bulls apparently liked the assurances from Yellen that rate hikes could still be more than two meetings away, Buchanan said.