By Frank Tang and Michael Taylor
NEW YORK/LONDON - Gold inched above $US1,100 an ounce on Tuesday as recent sharp losses offered some bargain hunting incentives, but key events including a US interest rate decision later in the week kept investors cautious.
The gold market has stabilised from Friday's fall to a near five-week low of $US1,081.90 when news of President Barack Obama's proposal to limit financial risk-taking hit the broader commodities markets.
With speculative positions in futures also falling, traders said the market could appear attractive to investors at current levels.
But investors were cautious about actively buying as the dollar, the main driver for the gold market, lacked clear direction. They were also waiting for key events including the Federal Reserve's interest rate decision and the State of the Union address by Obama, both on Wednesday.
"The market does not have much interest (in activity) ahead of the Fed rate decision," said Louis Lok, a senior dealer at Bank of China in Hong Kong, adding that gold prices were likely to stay in ranges between $US1,085 and $US1,110 until the rate outcome.
After wide-ranging trade last week and a correction from gold's high prices, some physical buying has been cited this week, he said.
"Especially with the market stabilising, some people may now have confidence to collect some gold at lower price levels. This may be a good opportunity over the medium term," Mr Lok said.
Spot gold inched up 0.3 per cent to $US1,101.75 per ounce as of 1325 AEDT, compared to New York's notional close of $US1,097.95.
US gold futures for February delivery rose 0.6 per cent to $US1,101.70 per ounce, compared to $US1,095.70 an ounce on the COMEX division of the New York Mercantile Exchange.
Spot platinum was at $US1,556.50 per ounce while spot palladium was at $US440.00.
Platinum and palladium, valued for their use in automobile catalytic converters, have been rising and hit multi-month highs last week on strong demand for US-based exchange-traded funds backed by the metals launched earlier this month.
Holdings of ETF Securities' US-based platinum exchange-traded fund rose 10 per cent on Friday, while those of its US palladium product climbed by a third, the company said on Monday.
In contrast, the gold market's sluggishness was reflected in holdings at the world's largest gold-backed exchange-traded fund, SPDR Gold Trust , which stayed unchanged from the previous business day at 1,111.922 tonnes as of January 25.
The US dollar was steady on Tuesday, holding on to gains made against the yen the previous day when news that Mr Bernanke had edged closer to winning support for a second term helped ease anxiety among investors.
Strong demand in Greece's five-year debt sale eased concerns about fiscal problems in the euro zone, lending the euro some modest support against the US dollar.
Currency market reaction was muted when administration officials said on Monday that Mr Obama will seek a three-year freeze on domestic spending in his 2011 budget that would save $US250 billion by 2020.
He will outline the spending hold-down in his State of the Union address on Wednesday.
