Gold prices stood firm on Wednesday, after gaining the most since Jan. 9 the day before, on higher demand for safe-haven assets over concerns of slowing global economy and uncertainties about the U.S.-China trade row.
Spot gold was little changed at $1,284.50 per ounce by 0553 GMT, while U.S. gold futures were up 0.1 percent at $1,284 per ounce. Spot gold rose 0.4 percent on Tuesday as global stock markets fell. Asian stocks edged down on Wednesday.
Disappointing macro fundamentals data and a sudden surge in uncertainties surrounding the U.S.- China trade talks have made investors shun riskier assets, fuelling demand for safety, said Margaret Yang, market analyst at CMC Markets.
However, a lack of significant movement in Asian equities was limiting gold's gains, Yang added.
Gold is often used as a hedge against political and economic uncertainty.
"As the risk sentiment is biased towards the bearish side, based on all this data, gold will have more room to go up and potentially challenge the resistance of $1,290-$1,295," Yang said.
Disappointing economic data from the United States and Japan added to the sense of an overall slowdown. U.S. home sales tumbled to their lowest in three years in December, data on Tuesday showed. Meanwhile, Japan export data released on Wednesday fell short of expectations.
Additionally, the Financial Times said that the United States rejected a Chinese offer for preparatory trade talks this week ahead of high-level negotiations scheduled for next week. White House economic adviser Larry Kudlow denied the report.
Also supporting gold was a prolonged partial U.S. government shutdown and expectations that the Federal Reserve will hold its multi-year rate hike cycle, analysts said.
Higher interest rates tend to reduce the appetite for non-yielding bullion.
Reflecting investors' appetite for gold, holdings of the SPDR Gold exchange-traded fund (ETF), the largest gold-based ETF, was at its highest since June 2018.
"Steady moves in the dollar even after dovish comments from Fed and disappointing macro economic data is restricting gold's movement besides its inability to break above the resistance at $1,300," said Hareesh V, head of commodity research at Geojit Financial Services.
Spot gold may break a support at $1,279 per ounce and fall to the next support at $1,268, as suggested by its wave pattern, a projection analysis and a rising trendline, according to Reuters technical analyst Wang Tao.
Meanwhile, palladium, which hit a record high of $1,434.50 an ounce last week on low inventories and rising demand, fell for a fourth session, dropping 0.3 percent to $1,345.50.
Silver rose 0.3 percent to $15.38 an ounce, while platinum was up 0.5 percent at $792.