By Zandi Shabalala
LONDON (Reuters) - Gold held steady on Tuesday after falling from a 3-1/2 month high in the previous session as the market waited on a speech by U.S. President Donald Trump that is expected to provide more clarity on economic reforms.
Spot gold was barely changed at $1,253.61 an ounce by 1300 GMT, having hit its highest since Nov. 11 at $1,263.80 on Monday.
U.S. gold futures fell 0.5 percent to $1,252.70.
Investors are shifting their attention to Trump's policy speech to a joint session of Congress on Tuesday night, when he is expected to provide clues on his tax-cutting plans.
"At the moment people are very cautious ahead of the comments by Mr. Trump. Investors don't want to take positions, there's too much uncertainty around what he may say," said Georgette Boele, commodity strategist at ABN AMRO in Amsterdam.
The President had said on Monday that he would propose a budget that would ramp up spending on defence while seeking savings elsewhere.
"After yesterday's news about an increase in military spending it will be even more complicated to keep the budget in check," said Commerzbank commodity analyst Carsten Fritsch, adding that expectations for tax cuts had also been raised.
"A massively increased budget deficit would undermine confidence in the dollar and benefit gold."
The dollar index was also little changed at 101.09 ahead of Trump's speech.
"A possible setback could set in (for gold) over the next 24 hours, but we could still end the week on a firmer note," INTL FCStone analyst Edward Meir said in a note.
Meir said that any price movement is likely to be short-lived because "many of the proposals need to translated into actual legislation and also need congressional approval".
But some upside could be on the cards for gold this week if U.S. Federal Reserve chair Janet Yellen suggests in her testimony on Friday that the central bank is likely to hold off from an interest rate move in March.
A delay in a Fed rate hike would be positive for non-interest bearing bullion while also pressuring the dollar, making dollar-denominated gold more appealing to buyers with other currencies.
However, there are still some Fed officials pushing for a rate increases as soon as next month.
Spot silver rose 0.2 percent to $18.30 an ounce, having touched a 3-1/2-week high at $18.48 in the previous session.
Platinum shed 1 percent at $1,018.74 after scaling a five-month high on Monday at $1,044.10. Palladium was unchanged at $780.50.
(Additional reporting by Nallur Sethuraman in Bengaluru and Eric Onstad in London; editing by David Goodman and Jason Neely)
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