Gold steadied above a two-week low on Tuesday, with investors awaiting direction from a Federal Reserve meeting for clues on the pace of monetary policy tightening in the United States.
Spot gold was nearly unchanged at $1,307.28 per ounce by 0711 GMT, after dropping to $1304.10, its lowest level since August 31 in the previous session. US gold futures for December delivery were flat at$1,310.50 an ounce.
“Even though gold still seems to be in a bullish trend, I think we'll probably test $1,300 first and then you'll see fresh speculative buying coming back in,” a Hong-Kong based trader said.
“Overall risk-on sentiment and the dollar strength seem to be driving gold lower. Generally, people are not buying into gold because stock markets are higher.”
Fed policy meet
Asian shares slipped on Tuesday, after touching a decade high on the previous day, hobbled by uncertainty as traders waited on the Fed meeting, due to begin later in the day, for clues on US monetary policy.
At the two-day Federal Open Market Committee meeting, the US central bank is widely expected to announce plans to trim its balance sheet but hold off raising interest rates for now.
The dollar on Tuesday eased against a basket of currencies but hovered near an eight-week high against the yen as US treasury yields continued to climb after signs of firming inflation.
Fed rate hike
Markets will also be watching for clues on the timing of the Fed's next interest rate hike as these tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.
“In all likelihood, gold will remain under some selling pressure into tomorrow's FOMC and will be particularly sensitive to moves on the US yield curve,” said Jeffrey Halley, a senior market analyst at OANDA.
UN General Assembly meeting
Meanwhile, ongoing rifts between the United States and North Korea are likely to take centre stage at the UN General Assembly meeting on Tuesday where President Donald Trump is set to speak for the first time.
The US military staged bombing drills with South Korea over the Korean peninsula, and Russia and China began naval exercises ahead of the UN meeting where North Korea's nuclear threat is likely to loom large.
Spot gold may drop to $1,299 per ounce, as it has broken a support at $1,309, said Reuters technicals analyst Wang Tao. In other precious metals, silver and platinum were both 0.5 per cent lower at $17.13 and $954.99 an ounce, while palladium lost 0.6 per cent at $930.13.