The price of gold fell on Tuesday as financial markets wait to hear what U.S. President Donald Trump has to say about his policies on tax reforms and government spending when he delivers a key speech to Congress this evening.
Gold is often seen as an alternative investment during times of geopolitical and financial uncertainty along with other "safe-haven" assets such as the Japanese yen and U.S. Treasuries.
Spot gold fell 0.23 percent at $1,249.76 per ounce. The metal hit its highest since Nov. 11 at $1,263.80 on Monday.
U.S. gold futures fell $4.90 to settle at $1,253.90.
Investors are shifting their attention to Trump's policy speech to a joint session of Congress on Tuesday night when he is expected to provide clues on his tax-cutting plans.
"At the moment people are very cautious ahead of the comments by Mr. Trump. Investors don't want to take positions, there's too much uncertainty around what he may say," said Georgette Boele, commodity strategist at ABN AMRO in Amsterdam.
The president had said on Monday that he would propose a budget that would ramp up spending on defense while seeking savings elsewhere.
"After yesterday's news about an increase in military spending it will even be more complicated to keep the budget in check," said Commerzbank commodity analyst Carsten Fritsch, adding that expectations for tax cuts had also been raised.
"A massively increased budget deficit would undermine confidence in the dollar and benefit gold."
The dollar index was little changed at 101.02 ahead of Trump's speech.
"A possible setback could set in (gold) over the next 24 hours, but we still could end the week on a firmer note," said INTL FCStone analyst Edward Meir.
Meir said that any price movement is likely to be short-lived because "many of the proposals need to translate into actual legislation and also need congressional approval."
But some upside could be on the cards for gold this week if U.S. Federal Reserve chair Janet Yellen suggests in her testimony on Friday that the central bank is likely to hold off from an interest rate move in March.
A delay in an interest rate hike by the U.S. Federal Reserve would be positive for non-interest bearing bullion while also keeping the dollar weaker, making the dollar-denominated metal more appealing to buyers paying in other currencies.
However, there are still some Fed officials pushing for a rate increase as soon as next month.
In other precious metals, silver was up 0.44 percent at $18.34. Platinum was down 0.25 percent at $1,025.30 and palladium dipped 1.54 percent to $768.47.