Gold bars. Picture: REUTERS
Gold bars. Picture: REUTERS

Bengaluru — Gold prices rose on Tuesday, propped up by buying after a recent price slump, but a strong dollar and the expectation of further interest rate hikes in the US limited interest in the precious metal.

Spot gold was up 0.3% at $1,209.20/oz at 3.32am GMT.

US gold futures were flat at $1,217.6/oz.

"There’s some very light demand from China and Southeast Asia. We’re just seeing some buying ahead of the first technical support around $1,205," a Sydney-based trader said.

Gold prices have declined nearly 12% since mid-April, pressured by a stronger US dollar from an ongoing US-China trade dispute and amid expectations of higher interest rates in the US.

The US Federal Reserve is widely expected to raise benchmark lending rates, for the third time this year, at its next policy meet in September. Higher US rates tend to boost the dollar, making greenback-denominated gold more expensive for holders of other currencies.

Meanwhile, holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.78% to 788.71 tonnes on Monday.

"The overall sentiment remains weak in light of ETF [exchange-traded funds] reducing positions, strong dollar and rate hikes," said Helen Lau, analyst at Argonaut Securities.

The dollar was almost steady against major peers in early trade on Tuesday, supported by tension around the US-China trade dispute and as the pound remained weak on the worry over a "hard" Brexit from the EU. The greenback, however, edged down 0.1% versus the yen.

Global markets on Tuesday remained focused on developments on the trade war front while oil investors braced for impact from the first set of US sanctions on Iran, set to take effect at 4.01am GMT. The Trump administration will aggressively enforce economic sanctions that it is re-imposing on Iran this week and expects the measures to have a significant effect on the Iranian economy, senior US administration officials said on Monday.

Those sanctions include precious metals, US bank notes, steel and coal.

Spot gold is poised to break a support at $1,206/oz, and fall towards the next support at $1,194, said Reuters technicals analyst Wang Tao.

In other precious metals, silver rose 0.4% to $15.32/oz.

Palladium inched up 0.1% at $904.55/oz, while platinum fell 0.2% to $819.70/oz.