Gold was broadly steady on Thursday, weighed slightly by traditional currency fundamentals as the dollar rose, but expectations for low interest rates and wider market jitters were keeping the metal's uptrend intact.
Spot gold stood at $1,233.95 an ounce by 1034 GMT, compared with $1,235.20 quoted late in New York on Wednesday. U.S. August gold futures were quoted at $1,235.20.
Having raced to a record $1,264.90 early this week, prices have struggled to gain further traction, leaving the market vulnerable to short-term setbacks. Gold has also latched back onto its traditional inverse correlation with the dollar.
The Federal Reserve acknowledged a faltering pace of U.S. economic recovery on Wednesday as it renewed its vow to hold benchmark interest rates exceptionally low for an extended period.
Low interest rates are generally good news for precious metals. We believe that the Fed and the ECB (European Central Bank) will remain on hold for quite sometime because of the European debt problems, said Tobias Merath, analyst at Credit Suisse.
European sovereign debt concerns were still on investors radars too with the cost of protecting government debt against default in Greece hitting a record high, while its bond yield spread widened ahead of Greek bonds being dumped by index fund managers at month end.
Technical analysts were positive on the market's ability to breech new highs, despite its current lack of traction.
Spot gold maintains a target of $1,300...$1,308.02 is an additional upside target en-route to the more significant $1,350/1,392.70 resistance area, Commerzbank said in a note to clients.
IN STEP WITH DOLLAR
Morath of Credit Suisse noted that after a sustained period of prices moving up in league with the dollar as Europe's mounting debt problems spiraled, markets were beginning to show some signs of normalizing.
Dollar funding costs are stabilizing, while the euro has also recovered some poise after its recent battering to multi-year lows versus the dollar.
We have seen austerity packages launched in Europe and market conditions seem to be starting to normalize, while other commodity prices also seem to have found support. We think the focus is shifting away from safe-havens and toward monetary policy, he said.
Overall the uptrend is still there. The market is slowly creeping higher with a few setbacks still there. But what we have is a series of higher highs and higher lows, he added.
On the investment front, the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings stood at 1,313.135 tons as of June 23, unchanged from a record marked the previous business day.
In other precious metals, platinum was pressured to $1,546.00 per ounce from $1,566.00 on Wednesday, while palladium
eased to $466.60 from $471.00.
Silver mimicked gold, staying flat at $18.45 an ounce. Silver's performance, like gold, has been impressive so far this year, having gained some 9.7 percent with investors using it as a cheaper proxy for gold bullion.
(Editing by James Jukwey)