"Investors are very cautious with many uncertainties on US-China trade talks and Brexit. Huawei is at the centre of dispute, creating very noisy background for the trade talks," said Margaret Yang, a market analyst at CMC Markets. "All these are making it more difficult for investors to judge the market's direction. Money is fleeing into assets such as gold, seeking safety."
The United States on Monday charged Huawei, its chief financial officer and two affiliates with bank and wire fraud to violate sanctions against Iran in a case that has escalated tensions with Beijing. Investors fear the charges could complicate high-level trade talks set to begin on Wednesday where Chinese Vice Premier Liu He will meet with US Trade Representative Robert Lighthizer and others.
The dollar index, a gauge of its value versus six major peers, held close to a two-week low, while Asian shares fell. Meanwhile, the US Federal Reserve's two-day policy meeting begins later in the day, where the central bank is expected to leave interest rates unchanged.
Gold tends to rise on expectations of lower interest rates, which reduce the opportunity cost of holding non-yielding bullion. The yellow metal has risen over 12 percent since touching a more than 1-1/2-year-low in August mostly due to volatile stock markets and a softer dollar on the back of expectations that the Fed will pause its multi-year rate-hike cycle.