Gold edged down as early bargain hunting subsided, and dealers said a weaker US dollar was probably needed to help the metal break free from its current range.
Speculators, who have built up positions in New York on worries about Greece's ability to repay its debt, may unwind holdings further but gold could find support at the current levels.
Dealers shrugged off news that China would be prudent in buying gold as a component of official reserves, which was in line with market thinking the country would not buy bullion in the open market, as it costs less to buy from domestic mines.
Spot gold hit an intraday high of $US1124.30 an ounce and was at $US1120.40, down $US2.45 from New York's notional close on Monday, when it fell 1 per cent.
Bullion was also around 1 per cent below a six-and-a-half-week high, near $US1150 an ounce hit in early March.
Safe-haven buying ignited by a sovereign debt crisis in Greece had pushed up prices as the inverse relation between gold and the dollar began to weaken but dealers said bullion could still turn to currencies for direction.
"It's still trading above the 50-and 100-day moving average, which is encouraging. If they can stay above $1110, you know there's a chance it could move back up towards $1150," said Mark Pervan, senior commodities analyst at ANZ in Melbourne.
"The gold market has been more influenced by safe haven rather than currency issues. But if we swing back to currency issues, then it will need a weaker dollar to trade through $1150 again," said Mr Pervan, referring to a January high.
The euro eased to $US1.3614 from $US1.3629 late in New York on Monday, when it gained marginally. The euro's advances were capped after Greek Prime Minister George Papandreou warned that a worsening of the Greek crisis could lead to a new global financial meltdown.
US gold futures for April delivery fell $US2 to $US1122 an ounce, having ended 1 per cent lower on technical selling.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings stood at 1116.120 tonnes as of March 8, unchanged from the previous business day.
Platinum and palladium slipped but held near their recent highs on hopes of steady demand from autocatalysts following robust sales figures in major gasoline markets in China and the United States.
Yi Gang, head of China's State Administration of Foreign Exchange, said the country would face serious constraints if it wanted to increase its gold holdings because the acquisitions would push up the price of the precious metal.
The market has long been rife with speculation that China will seek to diversify its foreign exchange reserves in part by buying more gold abroad.
"I think the market wants the signs from the currency markets whether the dollar is going north or south," said a dealer in Hong Kong.
"The market discounts the China story. It's an old story. I don't think China will buy gold in the open market. They will buy gold from their own mines," he added.
China's gold output jumped 11.34 per cent to a record of 313.98 tonnes in 2009, the China Gold Association has said, securing the country's position as the world's largest producer of the yellow metal.
US crude futures edged down on Tuesday after hitting an 8-week high above $US82 a barrel on Monday, ahead of industry data expected to show another rise in US crude inventories.
Reuters
