Gold fell below $1,200 an ounce on Thursday, nearing recent six-week lows, as growing optimism over the global economy limited investor interest in perceived safe-haven assets, although consumers helped contain losses.
Global equities .MIWD00000PUS rose to their highest in seven trading sessions, while Wall Street climbed after several top U.S. retail chains reported stronger-than-expected sales in June, which helped reinforce confidence in the upcoming quarterly reporting season.
Spot gold stood at $1,191.35 an ounce by 1514 GMT, compared with $1,201.85 late in New York on Wednesday, when it hit a low of $1,185.05, its lowest since May 25 and around 6 percent below late June's record high.
U.S. gold futures for August delivery dipped $8.90 to $1,190 an ounce.
The risk appetite is increasing again, said Jesper Dannesboe, senior commodity strategist at Societe Generale. Stocks, base metals are all rallying across the board.
Although it's been very profitable to buy gold from the dips, so I wouldn't dare say don't do it anymore, he added.
Gold prices have hit lifetime highs above $1,260 an ounce, fueled by concern the European debt crisis would spread and the U.S. economy was slowing.
In the euro zone, European Central Bank President Jean-Claude Trichet said the ECB was expecting the euro zone's recovery to be moderate and uneven after the bloc's interest rates were held at a record low 1.0 percent.
A lot of nervousness in the market had also stemmed from concern that debt-laden nations such as Portugal, Spain or Greece would be unable to access funding.
But a series of solid government bond auctions from both peripheral and core euro zone states, and the smooth repayment of nearly half a trillion euros' worth of emergency one-year loans by banks to the ECB last week went a long way toward soothing that concern.
I just feel that we could be near the top of the range for gold, said Credit Agricole analyst Robin Bhar. Maybe there are factors that will help support it, but I don't think you've got the fear factor any more.
Helping to keep gold relatively stable at the lower levels was a pick-up in consumer activity in key buying regions in line with the pullback in the price.
The physical sector saw buying interest from Indonesia and Thailand, but consumers were not too aggressive after prices crossed $1,200 level again, while holdings of gold in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust (GLD.P) were unchanged at 1,316.481 tonnes, near late June's record high.
There's still some buying but I guess most people are now waiting for delivery. Physical buying is still there and my premiums have gone up to 80 cents, said a dealer in Singapore.
Jewelers in India have been stocking up ahead of religious festivals, and other physical buyers in Asia snapped up bullion after prices fell.
India, which accounts for more than 20 percent of global demand, will celebrate the Hindu festival of Raksha Bandhan on Aug 24, Janmasthami and Ganesh Chaturthi in September.
Across the rest of the precious metals complex, silver was bid at $17.75 an ounce, compared with $18.00 on Wednesday, while platinum was at $1,504 an ounce, versus $1,523.50 and palladium was at $434.08, compared with $446.00.
(Additional reporting by Humeyra Pamuk, Editing by Veronica Brown)