Higher interest rates tend to boost the dollar and push bond yields up, increasing the opportunity cost of holding non-yielding bullion and thereby pressuring gold prices. Spot gold was down 0.2 percent at $1,255.91 an ounce by 3:32 p.m. ET (1932 GMT), while US gold futures settled up 0.3 percent at $1,256.40.
Capital Economics analyst Simona Gambarini said that gold's resilience could falter in coming weeks, citing indications in the Fed minutes that tighter monetary policy is on the cards. Federal fund futures implied that traders believe there is an 83 percent probability that the Fed will raise rates by a quarter of a percentage point at its June meeting, according to CME Group's FedWatch tool.
Expectations for US interest rates to rise next month and potentially again later in the year have helped keep gold prices below $1,300. Fed Governor Lael Brainard said that a brighter global economy is posing less risk to the Fed's US outlook, adding to the signal the US central bank sent in minutes released this week that it is likely to move forward with an expected rate increase in June.
"Gold appears to be caught in a range in which the physical market - demand from India and China - is providing strong support around $1,200/oz, but safe-haven flows have been insufficient to breach the $1,300/oz threshold," said Standard Chartered Precious Metals Analyst Suki Cooper. On the technical front, Sucden Financial analyst Kash Kamal said: "After the golden cross of the 50-day moving average over the 200-day moving average and yesterday's firm buying early on towards $1,250, it looks as if prices are consolidating the recent rally."
Global equities rose to fresh highs, the dollar index came off its lows, and oil prices fell after top oil producers extended output cuts for a shorter period than expected. Among other precious metals, silver fell 0.3 percent to $17.14 an ounce while platinum gained 0.3 percent to $946.95 and palladium rose 0.9 percent to $770.