Gold drops as higher equities, stronger dollar weigh

Bars of gold are seen at the Krastsvetmet company, one of the world's largest producers of precious metals in Moscow, Russia on January 31, 2023. 
Alexander Manzyuk | Anadolu Agency | Getty Images

Gold prices slipped on Wednesday as upbeat equities and a stronger dollar weighed, but declines in safe-haven bullion have been fairly contained so far, signaling lingering worries about the banking sector.

Spot gold was trading 0.5% lower at $1,964.41 per ounce. U.S. gold futures slipped 0.4% to $1,965.50.

"It's risk-on in the equity markets where stocks are going up," said Bob Haberkorn, senior market strategist at RJO Futures, adding "there's been no real new news of any banking issues that we don't already know about."

Wall Street's main indexes gained as worries about stress in the banking sector eased, while Treasury yields reversed course and fell, even as uncertainty still lingered among bond investors over the economic outlook.

The dollar gained about 0.3% against most major peers, pausing its recent declines. A stronger dollar makes bullion more expensive for overseas buyers.

"The marketplace is slowly moving beyond the U.S. and European banking troubles as risk appetite creeps back into the markets. However, veteran market watchers believe it's too soon for the 'all clear' siren regarding the matter," said Jim Wyckoff, senior analyst at Kitco Metals, in a note.

Investors will look to a key inflation gauge, the core Personal Consumption Expenditures (PCE) price index, expected at the end of the week for more clues on the Fed's monetary tightening plans.

"We're going to hover around the $2,000 (per ounce) level until we get to the next Fed meeting ... The Fed is the driver in the market for precious metals," Haberkorn said.

Investors priced about a 40% chance of a 25-basis-point hike in May, according to the CME FedWatch tool. Higher rates tend to dull zero-yield gold's appeal.

In other metals, spot silver gained 0.4% to $23.34 per ounce, platinum was up 0.6% to $969.35, while palladium added 1.1% to $1,435.54.