Gold prices held steady on Monday on expectations of a rate cut by the Federal Reserve this week, while investors awaited cues on the future trajectory of monetary easing by the U.S. central bank.
"Clearly, the gold market is going to be somewhat on hold awaiting Fed commentary on Wednesday. We know that we are getting a 25 basis-point (bps) cut. (But) on Wednesday, the question will be what to look ahead for from there," said David Meger, director of metals trading at High Ridge Futures.
Federal funds futures implied traders saw a 77% chance of a 25 bps rate cut at the U.S. central bank's July 30-31 policy meeting.
"Much will also depend on what Fed Chair Jerome Powell says in the subsequent press conference: If he makes no mention of a cycle of rate cuts, causing gold to come under pressure, we would not see this as a trend reversal but as an attractive buying opportunity," analysts at Commerzbank said in a note.
Lower interest rates reduce the opportunity cost of holding non-yielding bullion and weigh on the dollar.
The dollar held close to a two-month peak against key rivals. A stronger greenback makes dollar-denominated assets such as gold costlier for investors holding other currencies.
"We have seen the dollar slowly gaining in the last couple of weeks. It has not caused any significant correction but had caused a pause in gold trading," High Ridge Futures' Meger added.
Market participants will also keep a close eye on the U.S.-China trade talks in Shanghai this week, as negotiators from both countries meet for their first in-person talks since a truce at G20 last month. Expectations are low for a breakthrough.
Gold is a preferred asset during times of economic and political uncertainties.
Hedge funds and money managers reduced their bullish stance in COMEX gold in the week to July 23, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.
On the technical front, $1,400 will be the key downside support for gold, and beyond that, $1,380, OANDA senior market analyst Craig Erlam said.
"Bulls are very reluctant to let go just yet, but if we do see those levels break, we might see gold bulls head for the exits quite quickly."
Among other precious metals, silver slipped 0.2% to $16.36 per ounce.
Palladium fell 0.7% to $1,524.59 per ounce, while platinum climbed 1.5% to $872.84.