Spot gold held its ground at $1,699.09 per ounce, as of 0341 GMT, having touched its highest since Sept. 14 at $1,702.39 earlier in the day.
Prices jumped as much as 2.5% in the previous session, boosted by a drop in U.S. Treasury yields and the dollar as an economic data showed a slowdown in manufacturing activity, hinting at the impact of Fed's aggressive rate hikes. [USD/]
U.S. gold futures rose 0.2% to $1,705.40.
The benchmark U.S. 10-year Treasury yields edged closer to a 1-1/2-week low touched on Monday, while the dollar index was flat near Monday's low.
"People are a little bit leery about chasing gold higher ... The market is digesting the fact that Fed's Williams still sounded very hawkish and harping on about taming inflation," said Stephen Innes, managing partner at SPI Asset Management.
Federal Reserve Bank of New York President John Williams said on Monday that while there have been nascent signs of cooling inflation, underlying price pressures remain too high, which means the U.S. central bank must press forward to get inflation under control.
"To take the next level higher we are going to need a week jobs report ... The (gold) market may stabilize anywhere between $1,685 and $1,705 ahead of the jobs data," Innes added.
The U.S. non-farm payrolls due later this week will be closely watched for signals on the Fed's rate-hike path.
Although gold is seen as a hedge against inflation, higher rates increase the opportunity cost of holding bullion that pays no interest.
Indicative of sentiment, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose by 3.19 tonnes on Monday, their biggest one-day inflow since June.
Spot silver rose 0.3% to $20.82 per ounce, having earlier hit a peak since June 29.
Platinum was up 0.3% at $904.72 and palladium gained 1.1% to $2,245.59.
(Reporting by Eileen Soreng in Bengaluru; Editing by Sherry Jacob-Phillips)
By Eileen Soreng
