Gold inched higher on Tuesday as equities fell, the euro picked up and flows of metal out of exchange-traded funds stabilized, although a rise in Chinese benchmark rates limited gains.
The gold price came under intense pressure last week after more signs emerged that global growth continues to improve and that the euro zone debt crisis has not worsened, which eroded some investor appetite for the metal.
Spot gold was up 0.1 percent at $1,351.95 an ounce by 1207 GMT, set for a second consecutive weekly rise but still 5 percent below record highs struck in mid-December.
U.S. April gold futures were up 0.3 percent at $1,352.50 an ounce.
China's central bank raised interest rates by a quarter point to 6.06 percent, its second increase in just over a month as it steps up its fight against stubbornly high inflation.
Chinese investment or jewelry buying has been pretty strong over the last quarter, and I wouldn't have thought that it is going to slow down particularly, said Societe Generale analyst David Wilson.
Gold is getting some support from nervousness about northern Africa and the Middle East, and obviously still bubbling in the background are concerns about Europe, he said.
EGYPT UNREST CONTINUES
Political turmoil in Egypt, where protesters called for a fresh push to eject President Hosni Mubarak from power, has unsettled the investment community and pushed the oil price above $100 a barrel.
While the euro debt crisis is not in people's minds, the situation in the Middle East has become more important, so that will prevent investors from making any big sales, said LBBW commodities strategist Thorsten Proettel.
The SPDR holdings have been nearly unchanged, and profit-taking from investors has perhaps stopped for the moment, he said.
Since protesters took to the streets of Cairo and other major Egyptian cities in late January, the gold price has risen by over 3 percent, although much of the potential for safe-haven buying has been undermined by a rally in riskier assets, with the S&P 500 .SPX up 2 percent and the copper price up over 6 percent in the same period of time.
Holdings of metal in the SPDR Gold Trust have risen by 1 ton in the past week to 1,228.864 tons.
In January the fund registered its largest monthly outflow of metal since April 2008 as investors favored equities and industrial commodities over perceived safe-havens such as gold.
The euro backed off session highs against the dollar after a reading of German industrial output fell shy of expectations, while the Australian dollar slipped after the rise in Chinese interest rates reinforced fears that growth in the world's second-largest economy may slow.
European shares .FTEU3 fell by half a percent, backing off the previous day's 29-month closing highs.
Concerns over higher inflation in emerging markets, indications of an economic recovery gathering pace in the United States, modest valuations and tentative signs of stability in the euro zone sovereign debt crisis have fueled the outperformance of shares in developed markets.
Platinum and palladium rallied, although gains were tempered by China's interest rate decision.
Both metals have seen inflows into some of the major exchange-traded funds in the past week, such as ETF Securities' U.S.-listed products, indicating investor appetite.
Spot platinum was last up 0.2 percent at $1,841.24 an ounce, nearing its highest level since July 2008, while palladium remained within sight of fresh ten-year highs and was last up 0.4 percent at $818.50 an ounce.
Silver held in positive territory, up 0.1 percent at $29.40. The price is up about 5 percent this month so far and is within 5 percent of 31-year highs seen in early January.
The Austrian Mint said on Tuesday it will not make five- and 10-euro silver coins for circulation this year because of the high price, although it will continue making popular collector items such as its Philarmonic coins.