LONDON Gold slipped further from a 7-1/2 month high on Wednesday as European shares rose, dimming safe-haven demand and investors awaited guidance on the pace of further U.S. rate increases.
U.S. Federal Reserve Chair Janet Yellen will address Congress at 1330 GMT for the first time since hiking interest rates in December and is expected to insist that further rises this year remain on track, albeit at a slower pace. A slowing of rate hikes could help bullion, keeping down the opportunity cost to hold it. "The gold market will listen carefully to what Janet Yellen has to say (as) it is not factoring in a 100 percent probability of a Fed hike until well into 2017," Danske Bank senior analyst Jens Pedersen said. Spot gold was down 0.5 percent at $1,183.06 an ounce by 1302 GMT. The metal climbed to $1,200.60 on Monday, the highest since June 22, 2015, benefiting from a weakening dollar and lower appetite for risk amid worries about European banks. Gold will likely push higher on continued jitters in global equity markets, dollar weakness, bullish technicals and an increase in bullion investment buying, INTL FCStone analyst Edward Meir said.
"We suspect (Yellen's) remarks will come across as unusually dovish, allowing the dollar to resume its descent and giving commodity markets a bit of a lift late in the day on Wednesday," Meir said.
European stocks rallied after losses in Asia, while the dollar was unchanged against a basket of currencies, close to a 3-1/2 month low. The U.S. Treasury benchmark yield declined to a one-year trough.
The gold price rally has hurt demand from physical buyers of the metal, traders said.
Prices in India slipped to a record discount as traders struggled to draw buyers.
Dealers were offering a record discount of up to $25 an ounce to the London benchmark price. Top consumer China is closed this week for the Lunar New Year holiday. In other precious metals, spot silver was down 0.6 percent at $15.13 an ounce, after hitting a three-month high of $15.45 on Monday. Spot platinum fell 1.5 percent to $921.37 an ounce while palladium fell 0.9 percent to $508.55.
(Additional reporting by A.Ananthalakshmi in Singapore,; editing by Susanna Twidale and David Evans)
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Updated Date: Feb 11, 2016 01:00:15 IST