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Gold was little changed on Tuesday as investors held off doing business before US economic data, expected to provide clues on Federal Reserve policy, while uncertainty remained on a possible US strike on Syria.
The metal rose to a 3-1/2 month high of $1,433.31 an ounce last week, when a US strike on Syria seemed imminent. But demand started to abate after President Barack Obama decided to seek congressional approval, and Britain's parliament rejected participation in any military action.
"It is difficult to predict how the geopolitical situation will develop, but obviously this will be followed by the gold market, and if we have a massive crisis, prices will rise on the back of it," Standard Chartered analyst Daniel Smith said. Spot gold was unchanged at $1,394.30 an ounce by 12:30 GMT, while US gold futures for December edged down $1.40 to $1,394.70.
The metal slipped early on Tuesday but then regained ground, helped by stronger crude oil prices after firmer Chinese data. The positive correlation between gold and oil has risen in the past few sessions as gold is seen as a hedge against oil-led inflationary pressures.
Prices were kept in check by a stronger dollar, which hit a one-month high against a basket of currencies.
US Federal Reserve meeting
Many economists expect the US Federal Reserve to decide whether to begin tapering its commodity-friendly stimulus measures at its two-day policy meeting starting on September 17.
A scaling-back would hurt prices, which have been boosted by central bank liquidity over the past four years.
Investors are scrutinising economic data to gauge the strength of economic recovery and predict when the Fed is likely to start curbing its $85 billion per month bond-buying programme.
The focus will be on major central bank meetings later in the week and a series of crucial US economic data, culminating in the most important, the payrolls report, on Friday. On Tuesday, market participants will monitor the US Institute of Supply Management to publish its bellwether PMI for US factories.
"Any data out of the United States this week is going to be pretty critical to the outlook of gold, and we are expecting a strong labour report, which encourages the idea of QE tapering," Standard Chartered's Smith said.
In South Africa, the National Union of Mineworkers (NUM), which represents about two-thirds of more than 120,000 unionised gold miners in the country, is set to start a strike for higher pay later on Tuesday, although President Jacob Zuma appealed to unions to avoid it.
The shutdown could cost South Africa more than $35 million a day in lost output, but the impact on gold prices seems muted for now.
"At least psychologically, the forthcoming strikes in the South African gold mining industry - announced for today by the biggest union of mine workers - should also be lending some support," Commerzbank said.
"That said, we currently believe that gold's short-term potential has been fully exploited for now." Silver was up 0.3% to $24.19 an ounce. Spot platinum rose 0.7% to $1,523.99 an ounce, while spot palladium gained 1.1% at $720.97 an ounce.