The dollar fell on Monday, pressured by growing expectations the U.S. Federal Reserve will either pause or halt its interest rate hike cycle, with the euro and Swiss franc leading gains among its rivals.
"We are seeing buyers returning to the (gold) market on dips", said Saxo Bank analyst Ole Hansen, adding that the dollar weakness supported prices.
Financial markets are also optimistic about a meeting of U.S. officials and their counterparts in Beijing this week, the first face-to-face talks since U.S. President Donald Trump and Chinese President Xi Jinping agreed on December 1 to a 90-day truce in their trade war.
China's move to make it easier for banks to lend also provided support to equities, while investors keep an eye on Beijing as negotiators begin talks to end a trade war between the world's top two economies.
The two countries will continue trade talks in Beijing for an unscheduled third day, a member of the USA delegation said on Tuesday.More news: AMD's 7nm Radeon Vega VII takes aim at Nvidia's RTX 2080
"The main thing is the administration's implied progress on talks with China".
Spot gold was up 0.3 percent at $1,288.60 per ounce, as of 0306 GMT and U.S. gold futures gained about 0.4 percent to $1,290.70 per ounce.
The gains extended Friday's rise following robust USA employment data and a message from the Federal Reserve that it would be patient and flexible in policy decisions this year.
On Friday, US central bank chief Jerome Powell told the American Economic Association that the Fed was not on a preset path of rate hikes and it would be sensitive to the downside risks markets were pricing in. The pan-European STOXX 600 finished down 0.15 percent.
The dollar index is down by 0.238 points, or about 0.25% at 95.512, coming off an earlier high of 95.688.More news: Manuel Pellegrini: No issues with Marko Arnautovic after early substitution
"People are waiting to see what happens with the tariff talks between USA and China", said Phil Streible, senior commodities strategist at RJO Futures in Chicago.
Powell's position as Federal Reserve Chair had been jeopardy last month, when he hiked the interest rate for the fourth time in a year, despite repeated warning from the USA policymakers including U.S. president Donald Trump and the United States stocks paid a hefty price, posting their biggest loss since the year of great financial depression.
The dollar outperformed other currencies in 2018 as the Fed carried on tightening rates.
Stable equity markets and production cuts by the Organization of the Petroleum Exporting Countries helped oil prices rise for a fifth straight session. US crude CLc1 settled up 56 cents at $48.52 a barrel. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. It is not a solicitation to make any exchange in commodities, securities or other financial instruments.More news: R. Kelly under Investigation following Lifetime's Documentary