Gold edged higher on Tuesday as markets shifted focus from hawkish comments by a Federal Reserve official at the weekend to a meeting of global central bankers this week, awaiting further guidance on US interest rates. Spot gold rose 0.3 percent to $1,342.06 an ounce by 1437 GMT, having hit a two-week low of $1,331.35 in the previous session. US gold was flat at $1,344.
Prices fell on Monday after weekend comments by the Fed's No 2 policymaker, Stanley Fischer, saying that the central bank is close to hitting targets for full employment and 2 percent inflation, raising the prospect of a US rate increase. US Federal Reserve Chair Janet Yellen may provide more clarity on interest rates in a speech at an annual meeting of central bankers in Jackson Hole, Wyoming, starting August 25.
"There has been a bit of softness over the last couple of days owing to some comments from the Fed officials but now the market is staring into the headlights of the upcoming Jackson Hole meeting," said Citigroup analyst David Wilson. The Fed last week sent mixed messages in the minutes of its July meeting, though some members have suggested that rates could rise as soon as September.
The Fed increased rates for the first time in a decade in December, but expectations that it would hold off on further increases have helped to drive a 26 percent gain in gold prices this year. Gold is highly sensitive to rising rates, which boost the opportunity cost of holding non-yielding bullion while lifting the dollar, in which it is priced.
"Recent comments from Federal Reserve officials have been mixed, but the majority of their recent rhetoric has leaned toward the hawkish side of US monetary policy. There are now increasing ideas in the marketplace that the Fed will raise interest rates yet this year," Kitco Metals analyst Jim Wyckoff said in a note. The dollar fell 0.19 percent against a basket of major currencies, helping to underpin gold.
"Broadly speaking there is still a supportive environment for gold because the dollar index is increasingly breaking lower," ICBC Standard Banks's Tom Kendall said. Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.25 percent to 958.37 tonnes on Monday. Spot silver was up 0.95 percent at $19.04 an ounce, having fallen by more than 2 percent to its lowest in more than seven weeks on Monday. Platinum edged 0.76 percent higher to $1,107.30, while palladium gained 0.59 percent to $694.15.