Gold holds tight near $1,200 as dollar firms

Gold was stuck in a tight trading range above $1,200 an ounce on Tuesday, as the dollar firmed near a one-month peak against a basket of major currencies on prospects of higher U.S. interest rates this year.

Spot gold was steady at $1,206 an ounce by 0037 GMT. The metal was little changed in the previous session, as liquidity was thin due to U.S. and British holidays.

Bullion was not far off its lowest in about a week of $1,201.20 reached on Friday, after Federal Reserve Chair Janet Yellen said the U.S. central bank was poised to raise interest rates this year, as the economy was set to bounce back from an early-year slump and headwinds at home and abroad waned.

Investors believe higher U.S. interest rates would dent demand for non-interest-paying gold, while boosting the dollar.

The greenback was also boosted by weakness in the euro, which was pressured on worries Greece cannot service debt repayments next month amid a cash crunch.

A stronger dollar makes gold more expensive for holders of other currencies, and also diminishes its safe-haven appeal.

Bullion traders will be keenly eyeing U.S. economic data due later in the day, including consumer confidence and new home sales, for clues on the strength of the economy and how it would impact the Fed's monetary policy.

In news from Asia, China has established a fund that is expected to raise about $16 billion for gold-related investment as part of its "Silk Road" initiative to develop trade and transport infrastructure across Asia and beyond, official media reported.