Gold rose slightly on Tuesday, as a weakening U.S. dollar and sluggish stock market helped pull the precious metal off a one-week low hit in early trade, while traders also said uncertainty over the fate of a U.S. tax cut prompted some safe-haven buying of gold.
The U.S. dollar fell against a basket of major currencies. A weaker dollar boosted gold, making the dollar-denominated commodity less expensive to holders of other currencies.
Spot gold was up 0.34 percent at $1,281.94 per ounce, after heading as low as $1,270.56 in earlier trading. U.S. gold futures for December delivery settled up 0.3 percent at $1,282.90 per ounce.
"The overall equity markets are seeing a little weakness and more diversification into safe havens like gold," said Dan Hussey, senior market strategist at RJO Futures in Chicago, adding gold prices could target $1,350, in the short term.
U.S. stock indexes were lower after GE shares plunged for the second straight day and a drop in oil prices hit energy stocks. Worries about Republican tax plans and the economy's ability to deal with more interest rate hikes dented appetite for assets perceived as risky and boosted gold's appeal as a safe-haven, traders said.
Gold touched a session low of $1,270.56, its lowest since Nov. 6, after U.S. Treasury yields touched fresh highs as investors priced in a rate hike next month. Higher bond yields reduce gold's appeal.
On Monday, Congressional Republicans pushed ahead with a proposed U.S. tax code overhaul, but risks lay ahead with major intra-party disputes unsettled. A failed tax overhaul would hit risk appetite and benefit gold. Four of the world's top central bankers promised to keep openly guiding investors about future policy moves as they slowly withdraw the huge monetary stimulus rolled out during the financial crisis.
Elsewhere, hedge funds and money managers raised their net long position in COMEX gold by 7,027 contracts to 173,562 contracts in the week to Nov. 7, U.S. Commodity Futures Trading Commission data showed Monday. That marked the first time speculators raised their net long position in eight weeks.
Among other precious metals, silver was up 0.1 percent at $17.05 per ounce, while platinum was down 0.5 percent at $927. Palladium was down 0.48 percent at $985 an ounce, recovering from a two-week low of $974.97 hit earlier in the session.