The literal meaning is to be ready to fight, figuratively it means to be prepared and save one's resources until they are needed

In considering help for the unstable and dangerous country, the American Administration decided that the best posture for the U.S. - the policy of greatest prudence - was to wait and see, to keep American powder dry and to be ready for any solution

Nel considerare se aiutare o no quel paese politicamente instabile e pericoloso, il governo americano decise di attuare una politica di estrema prudenza, di stare a vedere, e di tenere le polveri asciutte per essere pronti ad ogni evenienza

The new atomic tests clash with the supposed anti-nuclear policy of that country. The fact that one has to weigh and wonder about all this means that we still have to keep our guard up and our powder dry

La ripresa di test atomici fa a pugni con la politica ufficialmente anti-nucleare di quel paese. Il fatto che si debba ancora riflettere su tutto ciò, vuol dire che non possiamo ancora abbassare la guardia e che dobbiamo tenere le polveri asciutte

The allusion is to gunpowder which soldiers had to keep dry in order to be ready to fight when required. This advice, so it is said, originated with Oliver Cromwell during his campaign in Ireland. Before the battle of Dunbar, his troops had to cross a river and he addressed them with these terms: "Put your trust in God; but mind to keep your powder dry'." 19th century citations of the phrase invariably give the full version - trust in God and keep your powder dry