LONDON Gold retreated from a 12-week high hit on Tuesday as equities and oil recovered from an earlier rout, but concerns over market volatility kept the market in positive territory ahead of a Federal Reserve meeting.
Chinese shares slumped 6 percent overnight while oil prices slid to under $30 a barrel, sending gold to a peak of $1,117.60 an ounce as spooked investors sought alternative assets.
The metal's glitter later dimmed a bit as stocks steadied and oil swung back into positive territory, but it remained higher, supported by technical signals after closing on Monday above its 100-day moving average, a firm line of resistance earlier this year.
Spot gold was up 0.4 percent at $1,111.96 an ounce at 1445 GMT, while U.S. gold futures for February delivery were up 0.6 percent at $1,112.40.
Gold has risen 5 percent in January as concerns over China and global growth hurt equities and industrial commodities. It is continuing to take direction from stocks, Saxo Bank's head of commodity research Ole Hansen said.
"Fundamentals continue to turn more favourable with lower bond yields, a slowing pace of U.S. rate hikes and underinvested funds all supporting the move higher," he said.
The Federal Reserve is expected to take notice of the macroeconomic headwinds from China at a two-day policy meeting starting later in the day, boosting hopes that it may go easy on increasing interest rates further.
The Federal Open Market Committee is widely expected to leave its federal funds rate unchanged at 0.25-0.50 percent.
That bodes well for gold. Current ultra-low rates cut the opportunity cost of holding non-yielding bullion, while keeping a lid on the dollar, in which it is priced.
The probability of another rate increase at the next Fed meeting in March has eased, with some analysts expecting a rise to be postponed to later in the year.
"We detect investor uncertainty that global financial turbulence may impact the real economy," HSBC said in a note.
"If this impacts U.S. monetary policy, gold may be a beneficiary. U.S. interest rate futures indicate the Fed may only raise rates one more time this year."
China's net gold imports for December via main conduit Hong Kong surged to the highest in more than two years, data showed on Tuesday, as investors lost faith in collapsing stock markets and a weakening currency and snapped up bullion.
Among other precious metals, platinum was up 1 percent at $864.50 an ounce, well off last week's seven-year trough of $806.31. Palladium was up 0.9 percent at $493.97, while silver was up 0.6 percent at $14.33.
(Additional reporting by Manolo Serapio Jr. in Manila; Editing by Tom Heneghan)
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