Gold rose on Tuesday on light cash buying to around $US920 per ounce, but investors were cautious as another day of improved US housing data could further dull the metal's appeal as a safe haven from volatility in other markets.
On Monday gold hit a one-week low of $US915.05 as Wall Street rallied after better-than-expected earnings results from the home improvement sector gave investors their latest reason to hope the worst of the recession was over.
Those prospects could be strengthened by April data on US housing starts and building permits due overnight, which economists think will show housing starts rose to 0.52 million from 0.51 million in March, according to a Reuters poll.
"Gold moved up slightly on physical buying below $US920, but it basically remained in the usual price range of between $US915 and $US930,'' said Peter Tse, a dealer at Scotia Mocatta in Hong Kong.
Spot gold rose 0.4 per cent to $US920.80 per ounce in Asian trade, compared with New York's notional close of $US917.20.
On Friday bullion hit a seven-week high of $US933.65 per ounce after data showed US core inflation in April rose more than expected.
"Right now gold does not have its own momentum, and follows movements elsewhere,'' Tse said, adding that the metal could come under pressure if US stocks extended their gains from Monday, when the S&P 500 index jumped 2.5 per cent.
US gold futures for June delivery inched down 0.1 per cent to $US920.70 per ounce, compared with Monday's settlement of $US921.70 an ounce on the COMEX division of the New York Mercantile Exchange.
Analysts also said gold would be well supported by any sign of rising prices, given the ample liquidity central banks have been supplying to help their economies recover.
Investors are torn between gold's allure as an alternative to equities and a hedge against a heat-up in economic activity or inflation, said Yukoh Shoji, an analyst at Orval Next Corp, a Japanese brokerage.
"Investors are finding it difficult to sell gold-backed exchange traded funds for now because inflation risk is looming in the long term,'' he said.
Investors have been neither adding or withdrawing money from gold-backed funds in the past few days, with holdings at the world's largest gold-backed ETF, SPDR Gold Trust, unchanged at 1105.62 tonnes from May 18.
