Gold prices buoyed by bargain hunters

Spot gold edged up 0.1% to $1,702.59 per ounce by 1207 GMT, having dropped to its lowest since Sept. 1 at $1,690.10.

U.S. gold futures were little changed at $1,713.30.

There might be some buying activity below $1,700, but as long as the U.S. Federal Reserve sticks to its hawkish tone, expect gold prices to fall further, said UBS analyst Giovanni Staunovo.

The ECB is expected to deliver a second big rate hike on Thursday to tame record-high inflation just as a halt in supplies from a major Russian gas pipeline fans further inflation and recession fears in Europe.

The U.S. Federal Reserve too is largely expected to deliver a 75 basis point rate increase later this month. The U.S. central bank has raised its benchmark overnight interest rate by 225 basis points in total since March.

Although gold is considered a hedge against inflation, rising U.S. interest rates reduce the appeal of non-yielding bullion.

The U.S. dollar scaled a fresh 20-year peak, making greenback-priced gold less attractive for overseas buyers. [USD/] While benchmark 10-year U.S. Treasury yields retreated after scaling their highest since June earlier in the session. [US/]

“The $1,700 mark has been a very important level for gold in the past... But it’s very difficult to be positive on gold at the moment and in the short term,” said Fawad Razaqzada, market analyst at City Index.

Elsewhere, spot silver rose 0.5% to $18.14 per ounce, platinum added 0.2% to $854.52, and palladium climbed 0.6% to $2,017.72.