Gold futures ended slightly higher and palladium dropped as much as 3 percent before paring losses on Tuesday, as investors braced for the US Federal Reserve's rate decision and comments on inflation and a barrage of economic data due later this week.
Most-active gold for April delivery on the Comex division of the New York Mercantile Exchange was up $1.10 at $650.20 an ounce, traded in a narrow range between $646.80 and $652.70 an ounce.
Estimated volume was 25,000 contracts, and options turnover was 5,000. Turnover in the Chicago Board of Trade's electronically traded 100-oz gold contract was 36,425 contracts as of 2:41 pm EST (1941 GMT).
Oil jumped nearly 5 percent as big money funds poured fresh cash into the market amid Opec cuts and cold US weather that could tighten supplies. The surge was fuelled by a rush of buying by funds on the eve of a fresh Opec production cut.
Gold is generally used by investors as a hedge against oil-led inflation. Joseph Guzzardi at Sabin Commodities said that both gold and silver had been trading choppy over the last few days, as they both posted nice gains before giving back somewhat in the last two days.
"It's the end of the gold roll. So let's see what happens today if the April starts getting aboard here," Guzzardi said. The first notice day for the February contract is set on Wednesday, and investors have to decide whether to roll the February futures into the April contract, creating additional buzz in the market.
Guzzardi said he expected the market to be quiet until the conclusion of the Fed meeting. Investors are looking ahead to the release of key US economic data due for this week, including the fourth-quarter GDP data and the Fed's rate decision on Wednesday, Personal Consumption Expenditure Index on Thursday and January employment data on Friday.
Greg Weldon, chief executive at weldononline.com, said the fact that the Fed was not likely to do anything to curb inflationary pressure, and that US money supply and credit continued to expand boosted the allure of gold.
Spot gold was quoted at $645.30/6.30 an ounce, compared with $642.60/3.60 traded late Monday. London's gold fix was $645.20. Comex March silver closed up 12.5 cents at $13.375 an ounce, traded in a tight range between $13.110 and $13.440. Spot silver rose to $13.310/3.380, above its late Monday quote of $13.140/3.210. Silver was fixed in London at $13.150 an ounce.
NYMEX April platinum ended $5.90 higher at $1,180.60 an ounce. Spot platinum fetched $1,170.00/75.00. NYMEX March palladium finished down $3.70, or 1.1 percent, at $341.25 an ounce. Spot palladium was quoted at $336/340.00.