Gold prices rise above $1,580 an ounce

 Gold prices rose above $1,580 an ounce on Tuesday as a retreat in the dollar lent support, but the metal struggled for significant gains after plumbing 10-month lows last week.

Well-received Chinese inflation data helped underpin the euro and push the dollar down a quarter-point against a currency basket. That helped lift interest in dollar-priced assets, including gold.

Reuters report yesterday showed that spot gold was up 0.6 percent at $1,582.61 an ounce at 1423 GMT, while U.S. gold futures for June delivery were up 0.7 percent at $1,582.80.

Investors remain cautious towards the metal, however, after it slipped sharply last week and struggled to build on a rebound made after weak U.S. jobs data.

“Many are simply undecided and the short sellers still smell the potential for a major reward should this weakness continue,” Saxo Bank Vice President Ole Hansen said. “Buyers have become a bit disillusioned with many probably preferring to sit it out until we make a move back above $1,620.” Traders will be closely watching minutes from the Federal Reserve’s latest policy meeting for clues on U.S. monetary policy, particularly any changes to its quantitative easing policy, he said.

“Fed minutes tomorrow may give us a clue as to how strong the QE conviction is and with U.S. data hitting a bit of a soft patch I see no major downside risk to gold,” Hansen said. “But now there is still the worry that the multi-year rally is over.” European shares steadied on Tuesday as Wall Street opened only slightly higher, with investors braced for corporate earnings that are expected to show only modest growth.

The euro was up 0.3 percent against the dollar, having hit a three-week high in earlier trade after stop-loss buying was triggered near $1.3050. The dollar index was down 0.25 percent.

UBS and Deutsche Bank cut their 2013 gold price forecasts on Tuesday, with Deutsche lowering its price view by 12 percent to $1,637 an ounce, saying returns from the metal may be on course for their worst annual performance since 2000.

“The forces which have propelled gold returns higher over the past decade, namely a weakening U.S. dollar, falling real interest rates and a rising U.S. equity risk premium have all moved into reverse since the end of last year,” it said.

UBS said market concerns on the scope of the Fed’s Quantitative Easing (QE) programme, a rotation into equities, benign inflation and the focus on better economic growth were all threats to gold’s ability to rise.