The dollar's sideways movement and gold's inability to break important price levels also made people nervous, dealers said.

"It looks like there is still some profit taking each time we move closer to $600 an ounce. Should we be able to keep the upside momentum and break the level, then we would see renewed interest from investors and speculative buyers," said Frederic Panizzutti, analyst at MKS Finance.

"On the physical front, gold demand is very sound in various regions. It's still going on and we expect physical demand to remain sound for the coming days," he added.

Gold hit a high of $593.75 an ounce, its highest in nearly two weeks, and was quoted at $589.30/590.30 by 0954 GMT. That was higher than $586.20/587.20 in New York late on Monday.

Bullion has rebounded nearly 4 percent since falling to a near three-month low of $571.20 on September 15.

"The yellow metal is not out of the woods yet though, particularly with gold's recent correlation with oil, and remains vulnerable to bouts of fund liquidation," said James Moore, analyst at TheBullionDesk.com.

Oil held above $61 a barrel after rebounding from a six-month low as speculators fear a deepening fall could prompt OPEC to rein in output.

Higher oil prices often elevate gold's appeal as a hedge against inflation. Expectations among investors that the U.S. Federal Reserve will keep interest rates on hold also contributed to Tuesday's rebound in gold, dealers said.