Gold rebounds as investors cover their shorts

Sets of gold bangles are displayed in a showcase of a showroom selling bridal jewellery in Peshawar

Spot gold rose 0.3% to $1,293.89 an ounce at 3.30am GMT, after shedding 1.7% and marking the lowest this year at $1,288.31 in the previous session.

Among the S&P industry groups, the rate-sensitive real estate space ended at the bottom of the standings with a 1.7% loss, including a 3.8% rout in the iShares U.S. Home Construction ETF.

"The most important driver (for gold) is the dollar and yields", said ABN AMRO analyst Georgette Boele.

As bond yields push higher and the markets wait on a Federal Reserve that is determined to hike interest rates ahead, fixed-income investors may look to bond exchange traded fund strategies that specifically incorporate an interest-rate hedged component to diminish the negative effects of rate risk and still maintain robust yield-generating opportunities.

Gold is highly sensitive to rising United States rates as these tend to boost the dollar and push bond yields up, adding pressure on the greenback-denominated, non-yielding bullion.

Gold prices rose on Monday on the back of a subdued dollar as investors considered the prospects of fewer interest rate hikes in the United States this year.

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Gold is likely to fall to $1,275 by the end of June and $1,250 by the end of the year as US yields and the dollar strengthen, said Boele.

Spot gold was almost unchanged at $1,311.51 per ounce at 0619 GMT. "Now you are below $1,300 and the 200-day moving average; people who hold long positions are a little bit nervous", she said.

Reuters technical analyst Wang Tao says spot gold could bounce to resistance at $1,302 before falling again. Fibonacci support for the metal was at $1,287, they added.

Meanwhile, Asian shares were under pressure after North Korea cancelled high-level talks with Seoul, denouncing military exercises between South Korea and the US and throwing into question next month's unprecedented summit between Kim Jong-un and US President Donald Trump. "Therefore it has not become a big driver for gold", said Argonaut Securities analyst Helen Lau.

In other precious metals, silver was up 0.4% at $16.29 an ounce after falling about 1.6% on Tuesday in its biggest one-day percentage decline since April 23.

Platinum eased by 0.3 percent to $890.60 and palladium lost 0.3 percent to $979.20.

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