Gold prices rose on Tuesday as the US dollar fell to fresh three-year lows, but an end to uncertainty created by a three-day US government shutdown capped gains. Spot gold was up 0.3 percent at $1,337.36 an ounce at 1:38 pm EST (1838 GMT) after touching a one-week high of $1,339.09, while US gold futures for February delivery settled up $4.80, or 0.4 percent, at $1,336.70 per ounce.
"The continuation of weakness in the dollar is prompting support in commodities across the board," said David Meger, director of metals trading at High Ridge Futures in Chicago. The dollar index fell to a fresh three-year low against a basket of six currencies, after data showed euro zone consumer confidence jumped much more than expected in January, underlining the strong momentum in its economy.
Gold was virtually unaffected by the shutdown in the previous session. Bullion traded in a tight range after the US Senate voted to pass a temporary spending plan through February 8 to end the government shutdown. Equity markets have since gained, however some market participants are pacing for a correction, said Josh Graves, senior commodities strategist at RJO Futures in Chicago.
"Equities are getting overdone, so you're seeing more guys positioning for at least a short-term correction," he said. Markets are also anticipating an expected US interest rate increase in March, which could affect 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. Among other precious metals, platinum was 0.8 percent lower at $1,002.80 an ounce, down from a more than four-month high touched in the previous session.
Silver was down 0.5 percent at $16.92 an ounce after touching a $3-1/2-week low of $16.73. Palladium was 0.9 percent lower at $1,087.97 an ounce.
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