Gold inched higher on Tuesday but was still below the previous day's six-week high, mirroring an advance in the U.S. dollar following a confirmation hearing for U.S. Federal Reserve chair nominee, Jerome Powell. The U.S. Federal Reserve is likely to raise interest rates again next month, Powell told the Senate Banking Committee.
He said the Fed should "respond decisively" to any new economic crisis, positioning himself as an heir to the policies of current chair Janet Yellen and her predecessor Ben Bernanke. Following his confirmation hearing, the U.S. dollar index rose against a basket of six currencies, rebounding from a two-month low the previous day, as risk appetite returned and U.S. equities hit new highs.
Gold is sensitive to the prospect for rising rates because they tend to strengthen the dollar and push U.S. bond yields higher, reducing the appeal of non-yielding bullion.
Spot gold was up 0.03 percent at $1,294.56 an ounce on Monday. Earlier that day, it hit a peak of $1,299.13, its highest since mid-October.
U.S. gold futures for December delivery settled up 50 cents, or 0.04 percent, at $1,294.90 per ounce.
Gold was struggling to find impetus for a break higher or lower, having stuck to its narrowest trading range of any month since late 2005 so far in November.
"Weve seen active buying on dips, yet certainly the pressure of the idea of a pending rate hike - a good portion of that is more than factored into the market," said David Meger, director of metals trading at High Ridge Futures in Chicago.
As traders await a possible vote on the U.S. tax code overhaul this week, new drama emerged in the Senate when a pair of Republican lawmakers demanded changes to the party's tax bill in exchange for help advancing the proposal. The upcoming tax vote and tensions over North Korea might create some activity in the gold market, Saxo Bank's head of commodity strategy Ole Hansen said.
"Overall it really depends on whether these or other events manage to weaken the dollar further," he said. "Without that gold remains stuck, with the underlying bid from diversification and tail-end risk protection strong enough to keep the downside risk limited."
Silver was down 1.1 percent at $16.84 per ounce, while platinum was down 0.1 percent at $946.50 and palladium was 1.8 percent higher at $1,024.50.