Gold held steady near $1,240 an ounce in Europe on Thursday, supported by concerns over weak global growth which are weighing on more economically sensitive assets like stocks and industrial commodities.
The precious metal is expected to extend its recent gains in the medium term, analysts say, after outperforming most other commodities and all other metals in the second half as investors turned to bullion as a haven from risk in the wider markets.
Spot gold was bid at $1,240.25 an ounce at 0957 GMT, against $1,241.35 late in New York on Wednesday. U.S. gold futures for August delivery eased $4.50 to $1,241.40.
Concerns over financial stability and the strength of the economic recovery lifted the metal to a record $1,264.90 an ounce last month, but it has struggled to make fresh gains.
It is not unusual for gold to trade in this way, with a period of consolidation after a healthy price rise, said Michael Widmer, an analyst at Bank of America-Merrill Lynch.
Investors are awaiting key U.S. payrolls data on Friday for clues as to the next direction of trade, he said.
The labor market report is quite critical because a lot of the recent consumer confidence drop came about because people are concerned about their employment prospects, he said.
If you do get a slowdown, the picture for some of the cyclical asset classes may be perceived to be not as strong... and that could be quite positive for gold overall.
European shares tumbled early on Thursday, falling below a key support level and retreating for the seventh time in eight sessions, after tepid Chinese economic data fueled concerns about the global recovery. .EU
The data, which showed pace of manufacturing growth in China slowed in June, also weighed on industrial commodities. Oil fell 1 percent, extending recent losses, while base metals like copper, zinc and nickel all declined.
Many commodities struggled in the second quarter as a soaring dollar and doubts about the strength of the economic recovery sapped demand for raw materials.
The benchmark Reuters Jefferies CRB index .CRB, which covers 19 mostly U.S.-traded commodities, finished down about 5.4 percent, its second quarterly loss in a row.
The euro rebounded versus the dollar, however, as concerns receded over the ability of European banks to repay 442 billion euros in loans to the European Central Bank.
Investment in gold was solid, with holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, still at a record 1,320 tonnes on Wednesday.
Demand for physical bullion in major consumer India was slack, however, as high prices and seasonal factors weighed.
India saw a sharp drop in imports in June, signaling recent record prices are weighing on demand even as the world's largest ETF reported record holdings.
Elsewhere, gold priced in Canadian dollars hit a record C$1,324.61 as the currency fell. Among other precious metals, silver was bid at $18.53 an ounce against $18.55.
Platinum group metals, largely used in manufacturing catalytic converters, were the biggest fallers, with platinum down to $1,514 an ounce against $1,531.50 and palladium slipping to $435.10 against $442.
Both could look to extend back toward chart support around $1,490/$430 on a combination of technical selling and China growth concerns, said TheBullionDesk.com analyst James Moore.
Today's U.S. auto sales data will also be monitored for a possible slowdown in demand.
(Reporting by Jan Harvey; Editing by Sue Thomas)