By Clara Denina
LONDON (Reuters) - Gold edged higher on Tuesday as the dollar dropped and investors remained cautious ahead of the outcome of the U.S. presidential elections.
The metal dropped nearly 2 percent in the previous session after the Federal Bureau of Investigation (FBI) said no criminal charges were warranted against Democratic candidate Hillary Clinton for using a private email server.
A Trump win, who has never held public office, would create more uncertainty in the market, which could benefit gold's appeal as a hedge against risk, analysts said.
"The problem with a Trump victory is that nobody knows what his policies will be and there will be a limbo between now and when he is inaugurated, which would be bad for the equity markets and bullish for gold," Societe Generale analyst Robin Bhar said.
"If Clinton wins, tomorrow will look like today and we could get more of a relief rally in equities and some gold selling."
Spot gold was up 0.2 percent at $1,284.53 an ounce by 1103 GMT. The metal posted the biggest daily loss in a month on Monday.
U.S. gold futures were up 0.4 percent at $1,284.90 an ounce.
"Gold could drop to the $1,250-$1,220 per ounce area where upon we would expect physical demand to increase and risk selling to wane," HSBC said in a note.
Markets also remained cautious of the implications of the U.S. election outcome on an anticipated interest rate hike by the Federal Reserve next month.
Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets, while also boosting the dollar, in which the metal is priced.
The double uncertainty over the election and the possible U.S. interest rate hike have boosted demand for gold and silver in the United States, dealers said.
In other news, falling consumer demand and a halving of central bank purchases resulted in a 10 percent drop in gold buying in the third quarter, data from the World Gold Council showed.
Silver rose 0.5 percent to $18.31 an ounce.
Platinum was unchanged at $1000.07 an ounce, after hitting $1008.60 earlier in the session, its highest since Oct. 4.
Palladium slipped 0.7 percent to $647 an ounce.
(Additional reporting by Apeksha Nair in Bengaluru; Editing by David Evans)
Disclaimer: No Business Standard Journalist was involved in creation of this content
