Gold prices edged up on Tuesday on a softer dollar and as investors covered short positions amid jitters about a global trade war due to U.S. President Donald Trump's plan to impose steel and aluminum tariffs.
Spot gold was up 0.1 percent at $1,321.05 per ounce as of 0746 GMT, while U.S. gold futures for April delivery rose 0.2 percent to $1,321.90 per ounce.
Spot gold has gained over $20 since March 1 when it touched its lowest in two months at $1,302.61 per ounce.
"The area $1,300 is an important support and it does not seem likely to fall below this area in the next few days, unless the U.S. dollar could manage to strongly recover," said ActivTrades analyst Carlo Alberto de Casa.
The dollar index, which measures the greenback against a basket of major currencies, eased 0.1 percent at 90.004. The currency tumbled to 16-month lows against the safe-haven yen late last week as concerns about a trade war gripped markets after Trump announced his plan for steel and aluminum tariffs.
"A lot of gold's movement of late has been driven by Trump's actions. Market watchers are closely watching what he is going to say and do as no one knows what he is actually going to do," said OCBC analyst Barnabas Gan.
"The threat of the steel and aluminum tariff materialising is still a possibility and that's why gold prices will be trading around these levels."
Trump refused to back down from his decision to levy tariffs on imported steel and aluminum tariffs despite a backlash from trade allies.
"In the near term, given the unpredictable nature of current market sentiment, investors will continue to buy gold on dips to hedge the growing tail risk from Trump's controversial policies," said Stephen Innes, APAC trading head at OANDA.
Worries have eased this week, however, as pressure to back off from plans to implement new tariffs grew and as market participants came to view Trump's proposed tariffs more as a negotiating tactic than a hard policy proposal.
Trump was expected to finalise the planned tariffs later in the week, although some observers familiar with the process said it could occur next week.
Asian shares regained some ground on Tuesday as investor worries about an imminent trade war eased. [MKTS/GLOB]
Spot gold may retest a support at $1,316 per ounce, as it may have completed a bounce from the March 1 low of $1,302.61, according to Reuters technical analyst Wang Tao.
In other precious metals, silver was down 0.1 percent at $16.41 per ounce.
Platinum fell 0.3 percent to $957.74 per ounce, while palladium was down 0.2 percent at $981.00 per ounce.