Gold prices recovered from an 18-month low hit in the previous session as a break below a key psychological level triggered buying, while the US dollar pared gains after scaling a 13-month high.

Spot gold was up 0.2 per cent at $1,195.77 an ounce, as of 0341 GMT. In the previous session, the bullion hit $1191.35, its lowest since January 30, 2017. US gold futures were up 0.3 per cent at $1,202 per ounce.

“Some stop-loss selling pushed the market lower below $1,200 ... We see some fresh buying interest from here as well as some physical interest,” said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.

“However, the market is still under pressure as the US dollar is still very strong. Also, interest rates are poised to go higher and market sentiments are bearish on the gold.”

The dollar index, which measures the greenback against a basket of six major currencies, was down about 0.1 per cent at 96.302 on Tuesday after climbing to a 13-month high on Monday.

“People punting on better growth prospects in the United States are hurting gold's prospects and other safe heavens like Yen and Franc etc have seen buying,” said Amit Kumar Gupta, portfolio management services head at Adroit Financial Services in New Delhi.

The euro hovered near one-year lows against the dollar and the Swiss franc on Tuesday as the Turkish lira wobbled, on worries economic troubles in Turkey could hit European banks and spread to other emerging economies.

Investors are nervous the plunge in the lira could prompt capital outflows from other emerging economies that run a hefty current account deficit and rely on foreign capital.

“If Turkey contagion spreads further, we may see some buying (in gold) but as of now that's coincided with US dollar safe haven buying. A fall in the dollar index will be a key indicator in gold forming a short-term bottom,” Gupta said.

Gold, which is used as an insurance against political and economic uncertainty, has failed to benefit this this year. Instead, investors have made a beeline for US Treasuries, seen as the ultimate safe haven, which meant they had to buy dollars.

SPDR Gold Trust

Investors' bearish stance on gold continued to reflect in record short positions and in the outflow of gold exchange traded products. Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.19 per cent to 784.60 tonnes on Monday from Friday.

Spot platinum rose 0.4 per cent to $800.40, after touching three-week low at $791.50 on Monday. Silver was up 0.3 per cent at $15. It hit an over 13-month low of $14.94 in the previous session. Palladium fell 0.3 per cent to $887.80.

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