Gold prices hit a fresh six-and-a-half-month low on Wednesday as the U.S. dollar steadied and investors turned to other safe-haven assets amid expectations of more interest rate hikes by the U.S. Federal Reserve.

Spot gold fell for a third straight session and was down 0.3 per cent at $1,255.51 an ounce, as of 0626 GMT, after hitting its lowest since mid-December at $1,253 earlier in the session.

US gold futures for August delivery were 0.2 per cent lower at $1,257.30 per ounce.

"Gold does not seem to be benefiting from any risks relating to rising trade tensions, but is experiencing declines from a firmer dollar and any improvement in equity markets,” said John Sharma, an economist at National Australia Bank.

"It appears that investors are seeking safe havens in the US treasuries and currencies such as the Japanese Yen. Near term, gold will remain under pressure.”

The dollar held steady against a basket of currencies, having gained 0.4 per cent overnight to snap four sessions of falls to a two-week low.

However, it was down 0.1 per cent at 109.90 against the yen, often sought in times of market turmoil and political tensions, after earlier touching 110.20.

A stronger dollar and higher US interest rates reduce demand for non-interest bearing gold as the metal becomes more expensive for holders of other currencies.

The US House of Representatives overwhelmingly passed a bill on Tuesday to tighten foreign investment rules, spurred by bipartisan concerns about Chinese bids to acquire  bids to acquire sophisticated US technology.

US President Donald Trump endorsed Treasury Secretary Steven Mnuchin’s measured approach to restrict Chinese investments in US technology companies.

The strong dollar and the prospect of a fourth rate hike have tempered gold prices, said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

Dallas Federal Reserve Bank President Robert Kaplan said he believes the US central bank’s monetary policy is still accommodative and suggested the Fed could raise rates at least two more times.

However, Atlanta Fed bank president Raphael Bostic said intensifying trade tensions over the last week have raised risks to the US economy, adding that he may rule out a fourth rate increase for the year if the trade war gets worse.

If the trade war continues, it will affect the global economy and could eventually push up gold prices, said Leung.

Meanwhile, spot silver fell 0.3 per cent to $16.20 an ounce. In the prior session, it hit its lowest since May 1 at $16.10.

Platinum declined 0.8 per cent to $858.50 an ounce.

Palladium was 0.2 per cent higher at $958.15. The metal touched its lowest since early April at $929.72 on Tuesday.

Economic Times