Gold edged up on Thursday, to just short of its highest since the start of July, as volatile equities and concerns about the global economy spurred buying from investors, but selling from jewelers capped gains.

Bullion remains vulnerable if investors have to sell positions to cover any sharp fall in equity markets caused by continued skepticism about the global economic recovery.

Spot gold rose $1.20 to $1,228.75 an ounce by 0518 GMT (1:18 a.m. EDT) after trading as high as $1,230.70 -- not far from a 1- month high of $1,232.35 an ounce hit on Wednesday.

There are still rumors of uncertainty, and problems within Europe are rising again which is going to help underpin gold. We've also got the physical gold market looking to pick up in the weeks ahead, said Darren Heathcote, head of trading at Investec Australia in Sydney.

We are gradually going to move higher, but it's not a full-on strong bull market at the moment, he added.

Gold prices remain supported by increased interest in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, which said its holdings rose to 1,295.516 tonnes by August 18 from to 1,294.604 tonnes on August 17.

The holdings hit a record at 1,320.436 tonnes on June 29.

U.S. gold futures for December delivery were steady at $1,231.0 an ounce, having hit a high of $1,234.40 on Wednesday, the strongest since July 1.

Cash and gold futures struck a record in June on worries the debt crisis in Europe was spreading and the U.S. economy was slowing.

In the physical market, high prices attracted selling from jewelers, but there was also bargain hunting.

Indonesia remains a light seller but Thailand is mixed, said a physical dealer in Singapore. I mean we are receiving scrap but at the same time, we are selling gold bars to them. It's weird.

The Nikkei firmed on bargain hunting on Thursday and also to track gains in Wall Street, but the yen's strength against the dollar kept further gains in check.

The euro slipped after a Spiegel report that austerity steps to fix Greece's debt trouble are damaging its economy, but falls in the currency were seen limited as the report provided few fresh incentives.

Oil was under pressure from a stronger dollar and brimming U.S. petroleum inventories, while modest gains in Asian equities provided support to a market focused on the prospects for economic growth.