Gold steadied on Tuesday as the dollar hovered near a one-month low following a trade deal between the United States and Mexico, but concerns around a still developing US-China trade row kept a check on prices of the precious metal. Spot gold inched 0.1 percent higher to $1,212.33 by 0711 GMT, after falling as much as 0.3 percent earlier in the day. Prices on Monday hit their highest in two weeks.
US gold futures were up 0.2 percent at $1,218.40 an ounce. Gold has lost its appeal as a safe-haven asset, having fallen over 7 percent this year, amid international trade disputes and the Turkish currency crisis, with investors increasingly turning to the dollar instead.
"The big elephant in the room is China. The trade escalation with China will play favourably into the US dollar as a risk aversion trade," said Stephen Innes, Asia-Pacific trading head at OANDA in Singapore. "The market is still a little bit nervous overall when it comes to buying into the weaker US dollar narrative."
Gold, however, has recovered after touching 1-1/2-year lows on Aug. 16 at $1,159.60 as the dollar's run slowed after US President Donald Trump criticized the Federal Reserve for raising interest rates at a time when the government was trying to stimulate the economy. Spot gold may rise to $1,224 an ounce, as it has broken a resistance at $1,209 per ounce, according to Reuters technical analyst Wang Tao.