BENGALURU: Gold prices held steady on Tuesday near last session's 2-1/2-month high as risk-averse investors sought refuge in the metal amid rising political tensions and economic uncertainty.
Spot gold was little changed at $1,226.71 an ounce at 0707 GMT. It touched $1,233.26 on Monday, its highest since July 26, as global stocks slid on rising tensions between Western powers and Saudi Arabia and concerns over the pace of global economic growth. Asian stocks rose modestly on Tuesday, gaining a firmer footing after a week of heavy losses.
US gold futures were flat at $1,230.40 an ounce.
"While the sell-off in stocks rekindled some demand, there were other key factors in play. With escalating trade tensions, concerns over slowing global growth, geopolitical tensions and US mid-term election jitters in the mix, gold has a chance to shine," said Lukman Otunuga, Research Analyst for FXTM.
"While the risk-off trading environment is poised to send gold higher in the near term, the medium- to longer-term outlook remains dictated by the dollar and US rate hike expectations."
Gold is used as an alternative investment during times of political and financial uncertainty.
The stock market is not stabilised yet and gold prices are expected to go up, said Yuichi Ikemizu, Tokyo branch manager, ICBC Standard Bank.
"If it (gold) breaks the $1,230 level, which has been a resistance for a long time, with short positions being still quite large, there is a good possibility of buyback of short positions which could push prices to $1,250."
Spot gold may fall into a range of $1,208-$1,217 per ounce, as it faces a strong resistance at $1,235, according to Reuters technical analyst Wang Tao.
Gold, usually seen as a safe store of value during political and economic uncertainty, remains down nearly 10 percent from its April peak after investors preferred the dollar as the US-China trade war unfolded against a background of higher US interest rates.
Meanwhile, China's factory-gate inflation cooled for a third straight month in September amid ebbing domestic demand, pointing to more pressure on the world's second biggest economy as it remains locked in an intensifying trade war with the United States.
"Short-covering activities have pushed gold prices higher as investors unwind bearish positions amidst heightened geopolitical uncertainties," said Benjamin Lu, commodities analyst, Phillip Futures.
"Though we remain bearish on the precious metal for the longer term, a series of short-covers might trigger a sharp push in gold prices for this week."
Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.55 percent to 748.76 tonnes on Monday.
In other metals, platinum was up 0.4 percent at $842.10 per ounce after touching its highest since July 10 at $850.10 on Monday. Palladium was flat at $1,083.40 and silver was little changed at $14.64.
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