Investing.com - Gold prices gave back Monday's gains on Tuesday as investors looked past a dismal U.S. factory barometer that sent investors ditching the dollar on concerns the Federal Reserve will keep stimulus programs in place.
Gold and the greenback tend to trade inversely with one another, and Fed stimulus tools such as bond purchases tend to bolster the yellow metal's appeal as a hedge.
On the Comex division of the New York Mercantile Exchange, gold futures for April delivery traded at USD1,253.30 a troy ounce during U.S. trading, down 0.52%, up from a session low of USD1,247.20 and off a high of 1,260.80.
The April contract settled up 1.62% at USD1,259.90 on Monday.
Futures were likely to find support at USD1,237.90 a troy ounce, Thursday's low, and resistance at USD1,266.10, Monday's high.
The dollar took a beating on Monday after the Institute for Supply Management said its manufacturing index fell to a seven-month low in January, which sent gold prices posting solid gains.
The ISM’s manufacturing purchasing managers’ index came in at 51.3 in January, down from 57.0 in December.
Analysts were expecting the index to inch down to 56.4 in January.
The report added new order growth fell at its fastest rate in 33 years, with the new orders index dropping to 51.2 from 64.4 in December. The employment index fell from 55.8 in December to 52.3, the weakest since June.
Also on Monday, U.K.-based Markit Economics reported that its U.S. manufacturing PMI came in at a three-month low of 53.7 for January, missing expectations for a 53.8 reading.
The soft numbers reminded investors that the Federal Reserve will trim its USD65 billion monthly bond-buying program on a gradual basis, or even leave it on hold if need be, while policy tightening remains far off on the horizon.
Stimulus tools tend to weaken the dollar by suppressing interest rates to spur recovery, thus bolstering gold's image as a hedge.
On Tuesday, however, the dollar regained ground on sentiments that harsh winter weather may have played a role on the indicator's poor showing, which wiped out gold's gains.
Elsewhere, the Commerce Department reported earlier Tuesday that U.S. factory orders fell 1.5% in January, better than expectations for a decline of 1.7%.
Meanwhile, silver for March delivery was up 0.43% and trading at USD19.493 a troy ounce, while copper futures for March delivery were up 0.45% and trading at USD3.198 a pound.