By Swati Verma
BENGALURU (Reuters) - Gold inched lower on Monday as investors took some profits following a recent rally, but the metal traded within a narrow range as caution set in ahead of the U.S. congressional elections.
Spot gold (XAU=) was down 0.1 percent at $1,230.76 per ounce by 1:30 p.m. EST (1830 GMT), trading in an $8 range. U.S. gold futures (GCcv1) settled down $1, or 0.1 percent, at $1,232.30.
"The market is just quiet ahead of the (U.S.) mid-term elections and people are waiting to see how it is going to play out after tomorrow," said Bob Haberkorn, senior market strategist at RJO Futures.
Analysts said some profit taking was also putting slight pressure on gold.
"Gold had quite a move over the past few weeks... we have seen a reduction in net-short positions because of uncertainties, but over the last week, we've seen a spurt again. So I think we're seeing some profit taking," ING analyst Warren Patterson said.
Investors will keep a close eye on the U.S. midterm elections which may fuel interest in bullion as a hedge against risk if the result sparks volatility in the wider financial markets.
Opinion polls show strong chances that the Democratic Party may win control of the House of Representatives in the Nov. 6 midterm elections.
"Should the Democrats surprise, we would expect pressure on the dollar and a move higher in the metals complex. Republican control of the both the House and Senate should create selling pressure," Peter Hug, global trading director at Kitco Metals, said in a note.
Bullion traders also awaited this week's Federal Reserve meeting to gauge the outlook for U.S. monetary policy.
"No one expects the Fed to raise interest rates this week. It is most likely going to happen next month. Gold is going to have a hard time rallying into the next Fed meeting in December," Haberkorn said. "If the Fed speech (this week) is as hawkish as it has been then why be long and fight it."
Speculators raised their net short position in gold to a three-week high in the week ended Oct. 30, according to U.S. Commodity Futures Trading Commission data. [CFTC/]
Also, highlighting investors' bearish sentiment toward bullion were holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust (GLD), which fell 0.23 percent to 759.06 tonnes on Friday. [GOL/ETF]
Elsewhere, silver (XAG=) fell 0.6 percent to $14.63 per ounce, while palladium (XPD=) jumped 1.6 percent to $1,134.
Platinum (XPT=) was down 0.1 percent at $866 per ounce, after hitting its highest level since June 25 at $873.
The gains in platinum could chiefly be attributed to short covering, considering the CFTC data, which showed "net short positions have been almost entirely reduced," Commerzbank analysts said in a note.
(Reporting by Swati Verma and Sumita Layek in Bengaluru; Editing by Richard Chang and Chizu Nomiyama)