Gold rose on Tuesday, underpinned by Sino-US trade friction and global stimulus although promising early-stage data for a potential COVID-19 vaccine spurred some risk appetite, keeping prices below a more than 7-year high hit in the last session.
Spot gold was up 0.2% at $1,735.83 per ounce by 0349 GMT. US gold futures gained 0.3% to $1,739.80.
Despite the news on a potential coronavirus vaccine lighting a fire under the equity markets, gold will remain very well bid due to the "ridiculously huge" Federal Reserve balance sheet, said Stephen Innes, chief market strategist at financial services firm AxiCorp.
On Monday, the metal hit its highest since October 2012 before retreating to close lower, as stocks and oil surged after drugmaker Moderna said its COVID-19 experimental vaccine showed promising results in an early-stage trial.
Asian shares jumped as the news boosted hopes for a swift reopening of the global economy.
Indicating some return to normalcy, epicentres of the pandemic, including New York, Italy and Spain, are gradually lifting restrictions that have kept millions inside.
"Gold investors still see the opportunity on both sides of the coin right now because optimism from lockdowns is also inflationary," said Innes.
"But the trade war itself is a huge risk as we saw through 2019, that was the primary driver for gold prices to go up."
Gold tends to benefit from widespread stimulus from central banks because it is widely viewed as a hedge against inflation and currency debasement.
The metal has risen about 14% this year as central banks rolled out a wave of interest rate cuts and other stimulus to limit the economic damage from the pandemic.
Meanwhile, the International Monetary Fund's head said the global economy would take much longer to recover fully from the shock caused by the pandemic than initially expected.
Raising fears of a further deterioration in Sino-US relations, stock exchange Nasdaq Inc is set to unveil new restrictions on initial public offerings, which will make it more difficult for some Chinese companies to debut on it, sources said.
Palladium slipped 0.3% to $2,006.95 per ounce, platinum fell 1% to $810.12, and silver declined 0.6% to $17.07.