Gold ticks lower on firmer dollar after Fed cranks up rates

Gold prices inched lower on Thursday, as the dollar recovered slightly after a large but widely expected interest rate hike by the U.S. central bank sent the currency tumbling in the previous session. Spot gold fell 0.1% to $1,831.63 per ounce, as of 0235 GMT, while U.S. gold futures rose 0.8% to $1,833.40.

The conflicting currents of support from potential safe-haven demand and inflationary hedge buying versus pressure from a higher interest rate regime are keeping gold prices balanced, said Michael McCarthy, chief strategy officer at Tiger Brokers, Australia.

Higher short-term U.S. interest rates and bond yields increase the opportunity cost of holding bullion, which yields no interest.

The U.S. Federal Reserve on Wednesday approved a 75-basis-point interest rate hike, its largest in more than a quarter of a century, to stem a surge in inflation, and flagged a slowing economy.

"Gold has been remarkably range-bound for weeks now (despite major news)... and it`s a real head-scratcher for traders at the moment to work out what exactly will drive gold out of this range," McCarthy said, adding the dollar`s overall upward trend presented a cautious outlook for gold.

The Fed`s announcement drove longer-dated U.S. government bond yields lower and nudged the dollar off two-decade highs, which took gold as much as 1.9% higher in the previous session.

Meanwhile, Asian stocks rose on Thursday, carrying momentum from a global equities rally overnight. 

However, key investors with big positions in gold know that the economic outlook is still challenging and still prefer to hold bullion as a safe-haven asset, said Brian Lan, managing director at dealer GoldSilver Central.

Spot silver firmed 0.1% to $21.67 per ounce, platinum gained 0.2% to $940.98, and palladium rose 0.5% to $1,870.79.