Gold fell to a one-week low on Tuesday as the US dollar rallied on expectations of a less aggressive interest rate cut by the Federal Reserve this month, while investors awaited Fed Chair Jerome Powell's testimony on monetary policy.
Spot gold fell 0.4% to $1,390.21 per ounce at 10:42 a.m. EDT (1442 GMT). The session trough of $1,386.11 was its lowest since July 2. US gold futures for August delivery shed 0.5% to $1,392.50 per ounce.
"A less dovish Fed on the back of better-than-expected jobs data and increased optimism about a US-China trade truce have strengthened the dollar, dragging on gold," said Jeff Klearman, portfolio manager at GraniteShares.
Powell's two-day testimony before the US Congress starts on Wednesday.
"If Powell confirms a dovish view, we will see some renewed dollar weakness and support for gold; bond yields will also find some support," said Saxo Bank analyst Ole Hansen. Otherwise, he said, gold "could see some additional long liquidation."
Market expectations of a 25-basis-point cut were at 98%, with chances for a 50-basis-point cut reduced to 5.9% from 25% last week. Investors also think there is a higher chance the Fed will not cut rates in September.
The dollar held near a three-week high versus a basket of major currencies, supported also by news the United States and China were set to relaunch trade talks this week.
However, the outlook for gold remained positive, with analysts citing support from Middle East tensions, the trade war and buying by central banks.
Top gold consumer China's reserves jumped to $87.27 billion from $79.83 billion at end-May.
On the technical front, gold is consolidating around $1,400, plus or minus $20 per ounce, said Samson Li, a Hong Kong-based precious metals analyst at Refinitiv GFMS.
Meanwhile, hedge funds and money managers raised their bullish stance in COMEX gold in the week to July 2.
"The biggest risk in the market is the success gold has had in attracting new buyers over the past month. Any change in the short term outlook could have a negative impact on prices because longs need to be reduced," Saxo Bank's Hansen said.
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.15% to 795.80 tonnes on Monday.
Among other precious metals, silver was little changed at $15.02 per ounce.
Palladium was down 1% at $1,546.11, and platinum fell 0.9% to $806.07 per ounce.