Uncertainties about how the euro zone would stabilise its fiscal conditions continued to bother investors, even after a pact over the weekend on a $115-billion bailout package for debt laden Ireland.
"We are in a period during which the market really doesn't know which direction things are heading. The European situation is still very uncertain. We had supposedly the solution of the Irish situation, but it didn't seem to please the markets too much," said Darren Heathcote, head of trading at Investec Australia.
Gold might benefit from safe-haven buying, if the situations in Europe and the Korean peninsula deteriorated. But a stronger dollar, another beneficiary of political and economic uncertainties, could weigh on gold prices.
The euro hovered above a two-month low hit on Monday, as investors cast doubt on the Ireland rescue package and expected other fiscally-troubled nations, such as Spain and
Portugal, to require aid.
"In fact, we would not be surprised to see the euro sell off to $1.28 by yearend, if indeed these two countries start to wobble, forcing the authorities to begin the torturous work
of cobbling yet more rescue packages," MF Global said in a research note.
South Korean President Lee Myung-bak vowed retaliation against any further provocation by the North after it attacked an island last week.
Spot gold edged up 0.1 percent at $1,369.45 an ounce by 0719 GMT, moving in a tight range of about $6.
Gold was on course for a fourth consecutive month of gains, matching a similar winning run from November 2008.
U.S. gold futures inched up 0.2 percent to $1,368.7.
Spot gold is biased to fall even through it remains technically neutral as it is rangebound between $1,350 and $1,375, said Wang Tao, a Reuters market analyst.
But physical buying in Asia remained supportive of gold prices.
"We've seen good physical demand from China and India, both from jewellers and investors," said a Hong Kong-based dealer, citing premium for gold bars in Hong Kong at $1.2 to $1.5 above London prices.
Tapping into growing appetite for gold from investors, China's Lion Fund Management Co became the first fund house to win approval to launch a fund that invests in gold-backed
exchange traded funds overseas.
Concerns on more tightening from Beijing lingered, with Shanghai shares slumping 3 percent by midday, as drying up of cash was prompting retail investors, already on edge over whether the central bank would introduce more tightening measures, to sell heavily weighted financial and
commodities issues.
The International Monetary Fund has slowed the rate of selling its gold by 40 percent in October from the previous month, as interest among central banks to own the metal increased as a hedge against economic uncertainty.
Spot silver gained 0.4 percent to $27.24 an ounce, heading for a 10-percent monthly gain, also a fourth straight month of gains.
