Gold inched lower on Tuesday as optimism over an effective COVID-19 vaccine offset concerns facing its eventual rollout, a subdued dollar and bets for further monetary support as infections surged in Europe and the United States.

Spot gold fell 0.1% to $1,887.40 per ounce by 1156 GMT, but held in a tight $9 range. US gold futures eased 0.1% to $1,886.20.

"Gold is mirroring the reaction of really everybody watching the evolution of the vaccines," and the positive news is clearly keeping a cap on the gold market, said Robin Bhar, an independent analyst.

"But it's still a long way to go" and long term factors, including likely inflation down the road, continue to be supportive for gold, Bhar added.

Also stemming bullion's downside, the dollar index was down 0.3%.

Gold shed as much as 1.3% on Monday after Moderna said its vaccine was 94.5% effective in preventing COVID-19 in a late-stage trial, becoming the second US drugmaker after Pfizer to report results exceeding expectations.

The vaccine news continued to buoy risk sentiment, although the rally stalled in European shares as focus turned to increasing coronavirus-led restrictions in Europe.

Gold, considered a hedge against inflation and currency debasement, has gained over 24% this year, mainly benefiting from global stimulus and near-zero interest rates to cushion the effect of the pandemic.

US Federal Reserve Vice Chair Richard Clarida on Monday acknowledged the new vaccine as a positive for economic recovery and said that the Fed would apply an expansive view of the labour market before deciding on any rate hikes.

Silver fell 0.6% to $24.60 per ounce. Platinum slipped 0.2% to $923.45, while palladium shed 0.4% to $2,322.75.

"Strong car sales in China, a likely vaccine and recovering economic activity should keep the palladium market tight once again in 2021, lifting prices to $2,600/oz," UBS analysts said in a note.