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Gold held steady on Tuesday after falling from a 3-1/2 month high in the previous session as the market waited on a speech by US President Donald Trump that is expected to provide more clarity on economic reforms.
Spot gold was down 0.1 percent at $1,251.46 an ounce by 1058 GMT, having hit its highest since Nov. 11 at $1,263.80 on Monday.
US gold futures fell 0.5 percent to $1,252.70.
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.
“There is lots of uncertainty ahead of Trump's speech,” said Commerzbank commodity analyst Carsten Fritsch, adding that expectations for tax cuts had been raised.
The President had said on Monday that he would propose a budget that would ramp up spending on defence 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,” Fritsch said.
“A massively increased budget deficit would undermine confidence in the dollar and benefit gold.” The dollar index was also little changed at 101.08 ahead of Trump's speech.
“A possible setback could set in (for gold) over the next 24 hours, but we could still end the week on a firmer note,” INTL FCStone analyst Edward Meir said in a note.
Meir said that any price movement is likely to be short-lived because “many of the proposals need to translated 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 a Fed rate hike would be positive for non-interest bearing bullion while also pressuring the dollar, making dollar-denominated gold more appealing to buyers with other currencies.
However, there are still some Fed officials pushing for a rate increases as soon as next month. Spot silver was flat at $18.26 an ounce, having touched a 3-1/2-week high at $18.48 in the previous session. Platinum was 0.1 percent weaker at $1,028.50 after scaling a five-month high on Monday at $1,044.10. Palladium bucked the downward trend in precious metals, firming 0.2 percent to $782.10.
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