Investing.com - Gold prices were higher in European trade on Wednesday, bouncing off the prior session's eight-week low after U.S. President Donald Trump abruptly fired FBI Director James Comey in a move that shocked Washington.
Rekindled fears that North Korea could be gearing up for another weapons test also supported gold.
Comex gold futures rose around $6.00, or about 0.5%, to $1,222.30 a troy ounce by 3:05AM ET (07:05GMT). Meanwhile, spot gold was at $1,221.80.
The yellow metal hit its lowest since March 15 at $1,214.30 on Tuesday amid fading demand for safe-haven assets.
Trump fired Comey on the advice of Deputy Attorney General Rod Rosenstein and Attorney General Jeff Sessions, over his handling of an election-year email scandal involving then-Democratic presidential nominee Hillary Clinton.
Democrats immediately accused Trump of having political motives, as Comey had been leading his agency's investigation into alleged Russian meddling in the 2016 U.S. presidential campaign and possible collusion with Trump's campaign.
Market analysts warned that Comey's firing could create a sideshow that may delay the Trump Administration's plans on tax reform and infrastructure spending, weighing on the dollar.
The dollar index, which tracks the greenback against a basket of six major currencies, slipped to 99.33, moving away from Tuesday's three-week high of 99.56.
The benchmark 10-year U.S. Treasury yield slipped to around 2.39%, down from Tuesday's five-week peak of 2.416%.
However, expectations of a Federal Reserve rate hike next month limited gains. Markets are pricing in around an 80% chance of a hike at the Fed's June meeting, according to Investing.com’s Fed Rate Monitor Tool.
The metal is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.
Also on the Comex, silver futures gained 14.4 cents, or about 0.9%, to $16.21 a troy ounce. It fell to $16.06 on Tuesday, a level not seen since January 3.
Elsewhere in metals trading, platinum tacked on 0.7% to $907.60, while palladium added 0.2% to $794.80 an ounce.
Copper futures dipped 0.4 cents to $2.494 a pound, not far from Monday's four-month low of $2.472, amid renewed concern over China's economic health.
China's April producer price inflation cooled more than expected in a sign manufacturing activity may be losing momentum along with other sectors of the economy as domestic demand remains muted and the government cracks down on financial risks.
China PPI gained 6.4% in April compared to the 6.9% forecast, while consumer prices increased 1.2% on year.