Gold edged up on Tuesday after two sessions of losses, as the dollar and shares eased ahead of a U.S. Federal Reserve policy meeting that may push back expectations for when U.S. interest rates will start to rise.
The Fed starts its first two-day policy meeting of the year later on Tuesday and investors expect it to acknowledge the uncertain global outlook and stick to its promise to be patient on tightening.
Spot gold was up 0.5 percent at $1,287.30 an ounce. The metal had fallen 1.6 percent in the previous two sessions on strong equities and uncertainties over the Greek election. Gold hit a five-month high of $1,306.20 on Thursday."The bullion market's focus may shift to the upcoming FOMC two-day meeting on 27-28 January,'' said James Steel, an analyst with HSBC, referring to the U.S. Federal Reserve's Federal Open Market Committee.
"In the near term, bullion may continue to consolidate from gains made earlier in the year,'' Steel said. Investors will be watching the Fed meeting for clues about the timing of any interest rate increase.
The general assumption is the Fed will acknowledge the uncertain global outlook and stick to its promise to be patient on tightening.
Its timetable remains for an increase in rates by mid-year, a move that could further boost the dollar and hurt bullion, a non-interest-bearing asset.
News on central bank gold purchases and inflows into the world's top gold-backed exchange-traded fund (ETF) failed to lend support to the metal.
The Netherlands raised its gold holdings for the first time in 16 years in December, while Russia extended its buying spree of the precious metal into a ninth straight month, data from the International Monetary Fund showed on Tuesday.
Holdings in SPDR Gold Trust, the top gold ETF, rose 0.24 percent to 743.44 tonnes on Monday.
In the physical markets, buying has slowed due to the higher prices, with premiums in major trading hubs easing.
In Singapore, premiums have fallen to 70 cents to $1 an ounce, compared with $1.20 earlier this month. In Hong Kong, premiums were at 50-70 cents an ounce, down from $1 two weeks ago.
Despite the slowdown, interest in top consumer China continued to remain stronger than last month due to the upcoming Lunar New Year holiday and is likely to stay so till mid-February.