LONDON - Gold prices rose on Tuesday as the dollar sat near three-year lows, but an end to the uncertainty created by a three-day U.S. government shutdown capped gains.
Gold was mostly unaffected by the shutdown in the previous session, trading in a tight range. Spot gold <XAU=> was up 0.2 percent at $1,336.56 an ounce at 1246 GMT after touching a one-week high of $1,338.46, while U.S. gold futures <GCcv1> for February delivery climbed 0.3 percent to $1,336 an ounce.
"Dollar is mostly weakening and that has continued to be the number one supporter of gold," FOREX.com analyst Fawad Razaqzada said, adding the robust performance of the euro and the pound had pushed gold higher in recent weeks.
The U.S. government shutdown had impacted the dollar, but was largely ignored by gold, Razaqzada said.
The dollar index <.DXY>, which measures the greenback against a basket of six major currencies, was holding close to a three-year low hit last week.
A weaker greenback makes dollar-denominated assets such as gold cheaper for holders of other currencies.
The U.S. Senate voted on Monday to pass a temporary spending plan through Feb. 8 to end the government shutdown.
Equity markets have since gained, with Wall Street's main indexes surging to record highs.
Gold should see a first support level of $1,331 an ounce, with initial resistance expected at the recent highs of $1,343 and closely followed by the psychological $1,350 mark, said MKS PAMP Group trader Tim Brown in a note.
"A consolidation above that level could be the signal for a push higher," he said.
The market is also keeping an eye on an expected U.S. interest rate increase in March, which could present a risk to gold.
"The anticipation of a March hike could act as additional weight for gold, although given this is now largely anticipated, the downside risks should be limited and gold's reaction function is likely to be asymmetric," UBS said in a note.
The U.S. economy is likely to grow in 2018 at its fastest pace in three years, fuelled by the biggest tax overhaul since the 1980s, according to a Reuters poll of more than 100 economists.
Faster economic growth in the world's largest economy would increase the likelihood of interest rate rises and dent the appeal of non-interest yielding bullion.
In other precious metals, platinum <XPT=> was 0.7 percent lower at $988.50 an ounce, down from a more than four-month high touched in the previous session.
Silver <XAG=> was down 0.4 percent at $16.95 an ounce.
Palladium <XPD=> was 0.8 percent lower at $1,089.70 an ounce.