Gold prices held steady on Monday as market participants gauged the global economic policy outlook, with inflation-based demand for bullion countering hawkish comments from US Federal Reserve officials, supporting the dollar and Treasury yields.
Gold is considered an inflationary hedge, but the metal is highly sensitive to rising US interest rates, which increases the opportunity cost of holding non-yielding bullion.
Spot gold was steady at $1,819.34 per ounce, as of 0615 GMT. US gold futures edged up 0.2% to $1,819.70, Reuters reported.
"Gold has been locked in sideways consolidation for a while now, the market is still undecided on where it's going," OCBC Bank economist Howie Lee said, adding that "there's still some lingering demand as an inflation hedge."
US 10-year Treasury yields hovered near two-year highs scaled in the previous week, after the US Fed said manufacturing output dropped 0.3% in December, shy of an estimate calling for a 0.5% rise.
Traders are now awaiting speeches from Fed officials this week ahead of the central bank's Jan. 25-26 policy meeting, but there have been more than enough hawkish comments to see the market almost fully price in a first interest rate hike for March and rates of 1.0% by the year-end.
Asian shares were dragged lower by weakness in Chinese economic data last week, although investors seemed relieved that US inflation data was not hot enough to prompt a faster monetary tightening by the Federal Reserve.
The dollar index held on to Friday's gains, as selling pressure abated driven by the view that the Fed's tightening moves were largely priced in.
Spot gold remains neutral in a range of $1,815 to $1,830 per ounce, and an escape could suggest a direction, according to Reuters' technical analyst Wang Tao.
Spot silver edged 0.1% higher to $22.97 an ounce, platinum rose 0.1% to $971.38, and palladium fell 0.2% to $1,874.70.
