Gold reclaims $1,500 mark as focus turns to Fed

Gold rose back above $1,500 an ounce on Tuesday, rebounding from the previous day's sharp losses as investors switched focus to the minutes of the US Federal Reserve's latest meeting, which will be closely watched for clues on further interest rate cuts.

Spot gold was up 0.6% at $1,503.75 per ounce by 1236 GMT, after falling to a near one-week low of $1,492.10 on Monday. US gold futures gained 0.2% to $1,513.80 an ounce.

Monday's correction followed a sharp price rally earlier this month that took gold to six-year highs, largely on the back of concerns over the US-China trade war and expectations for further cuts in US interest rates.

"This is a rebound after prices dropped for the last few days because the sentiment was improving in the financial markets and short-term traders took some profits after the (recent) rally," Julius Baer analyst Carsten Menke said.

"However, the fundamental backdrop for gold remains very supportive," he added, citing the ongoing trade dispute between the United States and China and a potential interest rate cut from the Fed.

The minutes from the US central bank's July policy meeting are due on Wednesday, with investors also keeping a close eye on the central bank's Jackson Hole seminar and this weekend's Group of Seven summit.

Traders see about an 83.8% chance of a 25 basis-point interest rate cut by the Fed in September.

Lower US interest rates put pressure on the dollar and bond yields, increasing the appeal of non-yielding bullion.

"While the improving market mood has the potential to send the precious metal lower in the near term, the medium to longer term outlook remains bullish," FXTM analyst Lukman Otunuga said in a note.

The dollar index hit a more than two-week high on Tuesday, boosted by slightly higher Treasury yields.

Equity markets around the world gained as hopes for stimulus in major economies tempered fears of a global recession.

The shift in sentiment towards riskier assets contributed to a more than 1.2% drop in gold prices on Monday, its biggest daily percentage decline in a month. But prices are still up nearly 17% this year and more than $80 so far this month.

On the technical front, spot gold may test support at $1,483 per ounce, a break below which could cause a fall to $1,467, according to Reuters technical analyst Wang Tao.

Among other precious metals, silver rose above the key $17 mark, gaining nearly 1% to $17.03 per ounce.

Palladium climbed 0.8% to $1,485.01 an ounce after hitting a more than two-week high of $1,487.18 earlier in the session. Platinum eased 0.1% to $849.52.