Gold inched higher on Tuesday, extending gains into a second straight session as poor economic data from both sides of the Atlantic helped raise hopes for further monetary stimulus measures, which would increase gold's appeal as an inflation hedge.
The latest figures showed that the U.S. and euro zone economies were still struggling in July, and a Wall Street Journal reported that the U.S. Federal Reserve was close to taking new steps to boost U.S. economic growth.
Gold has been trading largely sideways for the past few months as a lack of clarity on further monetary easing has kept investors wary. Gold stands to benefit from a rising inflation outlook resulting from rampant cash printing by central banks.
"Intervention by central banks in the form of stimulus will help gold break away from the range, but when it will take place is a tricky question," said Nick Trevethan, senior metals strategist at ANZ in Singapore.
If the Fed remained silent on a further round of quantitative easing, known as QE3, gold prices could move higher from late August as India's wedding season approaches, he added.
Investors are looking to the Fed's next policy meeting on July 31 and Aug 1 for clues on the central bank's attitude towards the bond purchasing programme.
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"We are stuck in consolidation mode right now, with $1,550-1,560 being a floor for the time being. If we break the key $1,530 level, it could trigger all sorts of nastiness," said Trevethan.
Spot gold had inched up 0.2 percent to $1,583.69 per ounce by 0331 GMT, extending gains into a second straight session.
The U.S. gold futures contract for August delivery gained 0.4 percent to $1,583.20.
Technical analysis indicated spot gold may be trapped in the range between $1,554.34 and $1,599 per ounce for the time being, said Reuters market analyst Wang Tao.
"Cash is king these days," said Dick Poon, manager of precious metals at Heraeus in Hong Kong. "People would rather hold cash as they are not sure what will happen in the euro zone."
Physical dealers described a yawning market as buyers patiently waited on the sidelines for bargain-hunting opportunities.
"Buying interest for physical gold is out there, but it is very choosy and price-sensitive," said ANZ's Trevethan.