Gold edged lower on Tuesday after rising to its highest in over four months in the previous session, as caution prevailed ahead of a central bankers' meeting this week.
Spot gold surged on Monday after U.S. Federal Reserve Chairman Ben Bernanke, in a report to a congressional panel, said the central bank sees room to further ease its monetary policy, raising hopes for another round of quantitative easing, or QE3.
Central bankers and finance ministers from around the world are scheduled to meet at Jackson Hole, Wyoming on August 31 and September 1, and investors expect speeches by Bernanke and European Central Bank chief Mario Draghi to shed light on possible measures to shore up their sluggish economies.
"If we get QE3, gold could rise to $1,680 or $1,700," said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong. "But for now, it is still unclear what is going to happen,
though hopes for QE are keeping gold supported at the $1,650 level."
Spot gold edged down 0.2 percent to $1,660.10 an ounce by 0627 GMT, after rising to $1,676.45 on Monday, its highest level since mid-April.
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U.S. gold fell 0.8 percent to $1,662.70.
Technical analysis suggested spot gold may drop to $1,643 during the day, said Reuters market analyst Wang Tao.
Scrap selling in Asia's physical gold market continued as Indonesia returns from the Eid al-Fitr celebrations marking the end of the fasting month and cashes out after gold surged more than 3 percent last week and broke above a $100 range that it had held since May.
"A lot of scrap is flooding the market," said a Singapore-based dealer. "Last week it was the Thais that sold scrap and this week is the Indonesians."
The euro eased against the dollar, extending losses for the third day straight, putting pressure on bullion.
Spot platinum traded around $1,530 an ounce, off a 3-1/2-month high of $1,558.49 hit last week, despite the festering labour strife in South Africa's platinum mines.
The Relative Strength Index on spot platinum and silver remained above 70, suggesting the underlying assets are overbought.
Spot silver lost 0.2 percent to $30.62 an ounce, easing from $31.26 hit on Monday, its highest level in nearly four months.
"Technical signals still look good on silver after we broke above the 200-day moving average," said a Shanghai-based trader, "But in the absence of improving industrial demand, the monetary policy will decide where prices will go."
The 200-day moving average stood at $30.30.
"If we are able to hold onto the 200-day moving average, the chart will look very nice and attract more buying interest," the trader added.
Total holdings of silver-backed exchange-traded funds fell 0.6 percent to 501.198 million ounces by August 27, but still gained 1 percent so far this month.