Gold steadied on Monday ahead of a meeting of the U.S. Federal Reserve this week that could yield clues to the future direction of U.S. interest rates and the dollar, key factors for precious metals prices.
A higher U.S. currency makes dollar-denominated gold more expensive for holders of other currencies, which could subdue demand. Dollar gains since the middle of April have led to losses of about 10 percent for spot gold prices.
"Gold is still a dollar story, and I see no sign of the correlation breaking down," said Oliver Nugent, commodities strategist at ING, adding that a significant driver for dollar gains has been safe haven flows due to trade tensions. "Lack of investor interest is leading gold to behave like a currency, there are no safe haven flows to gold."
The United States signaled last week it is set to push ahead with talks with Canada and Mexico after agreeing to suspend hostilities over tariffs with Europe in a deal that may clear the way for renewed pressure on China.
"There's a flurry of Fed announcements coming out this week, and I think we are in a holding pattern until we hear from one of these central bank opinions," said John Caruso, senior market strategist at RJO Futures.