Gold hovered just above a five-week low on Tuesday as traders waited for guidance on when the U.S. Federal Reserve will begin tapering its massive economic stimulus.
Bullion has lost more than 20 percent of its value this year as a recovering U.S. economy has dented its safe-haven appeal and raised fears the U.S. central bank would scale back its commodities-friendly bond purchases.
The Fed, which kicks off a two-day policy meeting on Tuesday, is widely expected to announce it will begin curbing its $85 billion monthly bond purchases by $10 billion - a smaller reduction than previously anticipated.
"From the current economic situation in the United States, we expect only a mild tapering, not any big action," said Helen Lau, an analyst at UOB-Kay Hian in Hong Kong. "So there would still be support for gold prices."
Lau said if the Fed does not begin tapering its stimulus this year, gold prices could be between $1,400 and $1,500 by the end of the year.
Spot gold had risen 0.03 percent to $1,313.76 an ounce by 0328 GMT, after falling 1 percent in the previous session to a five-week low of $1,303.85.
"The technical signals are neutral now, with strong support at $1,307," Phillip Futures analysts wrote in a note.
"We are inclined to believe that the support level will not hold and prices are likely to head straight for $1,227.20 should there be large movement that breaks out of the current consolidative range," the Phillip analysts said.
Silver rose nearly 1 percent after falling more than 2 percent on Monday.
LEADERSHIP UNCERTAINTY REMOVED
The recent abatement in geopolitical tensions in Syria has been negative for gold - which is often seen as a safe investment in times of turmoil - but news that former Treasury Secretary Lawrence Summers pulled out of the race to be the next Fed chairman will boost the metal, analysts said.
"It's good that Summers bowed out of the Fed chairman race. At least it has helped remove a lot of uncertainty. I think people will expect to see continuity of Ben Bernanke's easing policy," said Lau.
Traders are betting the U.S. central bank will keep policy easier for longer now that Summers is out of the running. Summers was regarded as more "hawkish" than current Vice Chair Janet Yellen, now deemed the new front-runner.