Gold prices edged up on Tuesday as disappointing Chinese factory activity data brought back concerns about the health of the global economy, denting risk appetite. Spot gold rose 0.4 percent to $1,285 per ounce at 0943 GMT. US gold futures were up 0.4 percent at $1,286.20 an ounce.
"The weaker Chinese PMI is a supportive element and aiding gold. Also, from a technical point of view, we have seen a rebound from $1,280, which is a good support level," said Carlo Alberto De Casa, chief analyst with ActivTrades, adding that a weaker dollar was also helping gold. "(I) don't see much room for decline in prices from here and only the strength of the US dollar can hurt gold."
European equity markets nudged down on Tuesday, following weaker Asian stock markets as the latest Chinese data pointed to some fragility in the world's second-largest economy despite Beijing's attempts to spur growth. Gold is generally used by investors as a safe-haven investment in times of economic and political concerns.
Investors now look to the US Federal Reserve's two-day policy meeting starting later in the day for clues on the interest rate outlook. The Fed is expected to leave interest rates unchanged as it seeks to balance robust economic growth against low inflation. Gold is highly sensitive to rising interest rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.
While the Fed's decision will boost bullion's appeal, the metal is yet to overcome bearish factors, and any rallies may be short-lived, traders and analysts said. "The yellow metal remains toppish toward $1,290 and is likely to continue to see bears weigh upon rallies over the near-term as the recent downtrend remains intact," MKS PAMP Group said in a note.
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