BENGALURU - Gold prices eased for a second session on Tuesday as a stronger dollar and bullish U.S. interest rate outlook outweighed support from an earlier equity market selloff.
Spot gold was down 0.1 percent at $1,186.51 per ounce at 1006 GMT. On Monday, it fell 1.2 percent in its biggest one-day percentage fall since Aug. 15, also touching a more than one-week low of $1,183.19.
U.S. gold futures edged 0.1 percent higher to $1,190.20.
Europe battled to fend off a four-day losing streak for world stocks, after weary investors saw Asian shares stumble to a 17-month low and bond markets hit by a fresh bout of selling.
Adding on to the bleak outlook, the International Monetary Fund on Tuesday cut its global economic growth forecast for the first time since 2016, citing pressures from ongoing trade tussles between the U.S. and China.
"Some of the main themes in gold markets are the U.S. Federal Reserve rate hike, higher yields and dollar strength," said Jens Pedersen, senior analyst at Danske Bank. "At the same time, fragile emerging markets and higher oil prices will mitigate those headwinds."
Gold has held in a $34 range for the last 1-1/2 months, which some analysts say suggests resilience, supported by concerns over economic growth in emerging markets and inflationary pressures from rising U.S. Treasury yields and soaring oil prices.
Traders said Monday's drop in prices triggered some physical demand for gold in China, the world's biggest consumer.
However, the metal has lost much of its safe-haven appeal this year with investors increasingly opting for the greenback instead, as expectations of further U.S. interest rate hikes make gold less attractive.
Higher interest rates boost the dollar and push bond yields up, putting pressure on gold by increasing the opportunity cost of holding the non-yielding bullion.
"The monetary policy by the Fed is dominating the whole equation, putting downward pressure on gold... The $1,200 level should be the centre of gravity for gold to sway back and forth." said Mark To, head of research at Hong Kong's Wing Fung Financial Group.
The Fed increased interest rates last month for the third time this year and is widely expected to hike again in December, with no suggestion the central bank's tightening policy will end any time soon.
Spot gold may end its recent weak bounce below resistance at $1,193 per ounce, and then retest support at $1,184, as suggested by a projection analysis, according to Reuters technical analyst Wang Tao.
Among other precious metals, spot silver eased 0.2 percent to $14.31. Platinum inched 0.2 percent lower to $815.60, and palladium also dipped 0.2 percent to $1,073.30.