Gold moved lower on Tuesday on buoyant global equities and as the dollar strengthened after upbeat US data, while the market continued to monitor international political tensions. Palladium steadied near a 13-year high of $900 an ounce hit in the previous session, supported by worries about supplies from top producer Russia and strong demand prospects. Prices were unchanged at $888.75 an ounce by 1440 GMT.
"It is mostly the demand side, with record-high car sales from China, while supply comes from South Africa and Russia, where there are continued disruptions... this makes it the perfect candidate for funds to step in," Saxo Bank senio manager Ole Hansen said. Spot gold, higher initially, fell 0.1 percent to $1,296.50 an ounce. The metal traded in a small $8 an ounce range, indicating low volumes.
US gold futures for December delivery were down 0.2 percent at $1,297.50 an ounce. "Gold obviously didn't like the US CPI and housing data, which boosted the dollar," Hansen said. The dollar extended earlier gains against a basket of main currencies after data showed US housing starts rebounded strongly in July after two straight months of declines. Separately, US consumer prices barely rose during the same month.
The market was awaiting the annual meeting of central bankers in Jackson Hole, Wyoming, on Thursday, which includes a speech on Friday from Federal Reserve chief Janet Yellen that could give clues on the timing of any rate rise. The US central bank is expected to raise rates in the middle of next year, depending on the strength of the economy. Higher interest rates would encourage investors to withdraw money from non-interest-bearing assets such as gold. "Traders will be watching eagerly later in the week at the FOMC minutes and Jackson Hole address to gauge any clues to the timing of a Fed rate hike," MKS said in a note.
"Any major developments at these events could provide the catalyst to tease gold out of the monotonous $1290-1320 range we have traded over the past 2 months," MKS said. Gold was also pressured by a return in risk appetite that saw equity markets rise on easing international political tensions. Tensions in Ukraine and the Middle East have largely contributed to gold's near 8 percent gain this year, igniting bouts of demand when investors turned to assets perceived as an insurance against risk. However, any impetus that these events have provided has not lasted long, analysts said.
The metal gained some support earlier from news that holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 2.09 tonnes to 797.69 tonnes on Monday, the first inflow in nearly four weeks. Silver touched a fresh a two-month low of $19.38 an ounce, while platinum fell 0.4 percent to $1,434.49 an ounce.