Gold prices edged up on Tuesday, underpinned by healthy demand, but an increasing probability of a U.S. interest rate hike and a firm U.S. dollar kept prices range-bound.
Spot gold was up 0.1 percent at $1,265.82 an ounce at 0431 GMT, while U.S. gold futures were up 0.2 percent at $1,266.10 an ounce.
Chicago Fed President, Charles Evans, said on Monday the U.S. central bank will raise policy rate three more times by the end of next year, if inflation expectations and the labor market continues to improve.
The Markit survey of U.S. manufacturing climbed to a one-year top of 53.2, while business activity in Europe expanded at the fastest pace this year so far in October.
However, the underlying demand is strong for the metal, said ANZ analyst Daniel Hynes.
"The broad backdrop for gold is still quite positive, with rising inflation expectations, quantitative easing in Europe and Japan, negative yields, sovereign bonds," Hynes said.
"But certainly impetus for another round of kick higher is lacking at the moment," he added.
The dollar index, which measures the greenback against a basket of currencies, held steady at 98.76, after hitting a nine-month high on Monday.
"The possibility of a December rate rise is gold bearish near term but if policy rates remain low for some time, the gold market should be well supported in the medium to longer term," said James Steel, an analyst at HSBC.
The metal is highly sensitive to rising U.S. interest rates, which can lift the opportunity cost of holding non-interest-bearing gold.
"We expect the gold price to test resistance at $1,269.30 (200-day moving average) again this week before the next resistance level at 1,274 $/oz comes into reach," Heraeus Metal Management said in a note.
Spot gold looks neutral in a range of $1,261-$1,273 per ounce, and only an escape could suggest a direction, Reuters technical analyst Wang Tao said.
Silver was up about 0.4 percent at $17.62 an ounce. It touched an over 2-week high of $17.88 in the previous session.
Platinum was up 1 percent at $945.60 an ounce, while palladium was up 0.7 percent at $634.97.
(Reporting by Apeksha Nair in Bengaluru; Editing by Richard Pullin and Amrutha Gayathri)