Gold prices ticked lower on Tuesday as investors continued to fret over the possibility of an earlier-than-expected hike in U.S. interest rates, while palladium was trading near a 13-year high on supply worries.
A strong U.S. jobs report last week spurred speculation the Federal Reserve could increase rates soon on the back of a solid economic recovery. A hike would encourage investors to withdraw money from non-interest-bearing assets such as gold.
Spot gold had fallen 0.2 percent to $1,317.80 an ounce by 0307 GMT after closing flat in the previous session.
"Expectations of an early rate hike by the Fed are continuing to weigh on investors," said ANZ analyst Victor Thianpiriya.
"The market has seen several changes from forecasters come through over the past week, with expectations of a rise in U.S. interest rates now sitting at mid-2015 rather than early 2016."
The market is now eyeing the release of minutes from the Fed's June policy meeting to gauge the central bank's view on interest rates and economic strength.
Some traders said a lack of support from physical markets could also weigh on prices.
Physical demand in top gold consumer Asia has been weak as the metal is holding above $1,300. Many are waiting for a drop in prices before making any purchases. Meanwhile, gold is still seeing some safe-haven demand from geopolitical tensions in the Middle East and Ukraine.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings rose 1.8 tonnes to 798.19 tonnes on Monday.
SUPPLY FEARS BOOST PGMS
Platinum group metals (PGMs) continued to benefit from concerns over the supply situation in South Africa, which recently witnessed a five-month long strike at top producers.
The strike ended late last month but other smaller strikes have since broken out, burnishing supply fears.
Impala Platinum said on Monday that wildcat strikers at its Marula mine had indicated they would return to work on Tuesday and press their demands through "formal channels", but tensions remained high.
Palladium was trading near a 13-year peak of $868.50 hit on Monday. The metal, used in catalytic converters, was aided by last week's data showing U.S. auto sales at an eight-year high in June.