Gold shot up by nearly one percent on Wednesday, after four sessions of losses amid broad support from unrest in the Middle East and North Africa, but gains may stay limited by expectations monetary policy in key regions may tighten.
Spot gold was bid at $1,430.55 an ounce at 1344 GMT, against $1,415.95 late in New York on Tuesday.
The precious metal hit a record $1,447.40 an ounce last week after months of unrest across North Africa and the Middle East, with violence continuing to simmer in Libya, Bahrain, Syria and Yemen.
While this is limiting any correction in the gold price, the precious metal has struggled to eke out fresh gains as financial markets digest hints from the euro zone and U.S. authorities they may be set to tighten historically loose monetary policy.
Gold players are anxiously waiting for policy signals from the U.S. and to see what the ECB (European Central Bank) actually does next week in its monthly meeting, said Credit Agricole analyst Robin Bhar.
It would take an extraordinary event for the ECB not to hike, and in the U.S. tightening rather than keeping this accommodative bias (is likely). Those two factors do put a non-interest bearing asset like gold at a disadvantage.
Geopolitical (risks), elevated oil prices, the debt situation in the euro zone will continue to provide support, so there is a floor for gold, he added. (But) unless any or all of those factors increase in gravity, it is difficult to see what trigger from the buy side will push gold back to highs.
On the foreign exchange markets, the euro rose to a 10-month high versus a broadly weaker yen on expectations that euro zone interest rates will rise in April, though it eased a touch versus the dollar.
LARGEST ETF SEES FRESH OUTFLOW
Investment in products such as gold-backed exchange-traded funds remained soft, meanwhile, with holdings of the largest, New York's SPDR Gold Trust, slipping around two tons on Tuesday to their lowest in three weeks.
The fund is heading for its largest quarterly outflow of bullion since its launch in the first three months of 2011.
Analysts have long feared that significant selling from ETFs -- which issue securities backed by physical stocks of the metal -- could flood the market with gold, but so far selling has easily been balanced by other forms of consumption.
Gold demand to make jewelry, dental fillings and electronics will jump more than 5 percent this year, the biggest rise since 2000, metals research and consultant CPM Group said late on Tuesday.
Elsewhere, metals consultancy GFMS said in a report prepared in conjunction with the Silver Institute that industrial demand for silver was set to rise to 665.9 million ounces by 2015 from 4487.4 million ounces last year.
At country level, the Asian region (especially China and India) will be the growth driver, while industrial nations such as the U.S. should also register strong demand, said Commerzbank in a note.
Silver was bid at $37.64 an ounce against $37.07. Platinum was at $1,742.55 an ounce against $1,734.45, while palladium was at $751.97 against $748.28.