Gold pops, then slumps after Fed minutes are released

Gold coins
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Gold prices slumped after initially popping higher on Wednesday as investors reacted to the minutes of the Federal Reserve's latest policy meeting.

In the Fed's minutes released Wednesday, the central bank signaled an increase in economic growth and an uptick in inflation as justification to continue to raise interest rates gradually. The central bank said it believes inflation can reach its 2 percent target, but does not think inflation is getting out of hand.

Spot gold was down 0.49 percent at $1,323.01 an ounce at 3:09 p.m. EST, off an earlier low of $1,325.20. U.S. gold futures for April delivery were down 0.46 percent an ounce at $1,325.10.

Gold slid 1.3 percent on Tuesday, the most on any day since Dec. 7, as a rise in U.S. yields boosted the dollar and weakened the appeal of non-interest bearing gold. Benchmark 10-year Treasury yields hovered near a four-year peak on Tuesday.

Yields had risen after the U.S. Treasury Department issued more debt in anticipation of a higher deficit from last year's tax overhaul and a budget deal that will lift federal spending over the next two years.

Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

Interest in physical gold has been muted this week during the Lunar New Year holiday across much of Asia, including major consumer China.

"The return of China will be closely to watched for any renewed physical interest in Asia to stem the weakness," MKS said in a note. The firm dollar and higher Treasury yields are likely to keep the metal under pressure, however, it said.

On the investment side of the market, holdings at the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, rose 3.2 tons on Tuesday to 827.79 tonnes.

Among other precious metals, silver flattened out around $16.45 an ounce, while palladium was down 1.2 percent at $1,021.24 and platinum fell 0.95 percent at $990.20.