Gold held steady on Tuesday on safe haven buying as a downgrade of Greece's debt to junk reminded investors the debt crisis in Europe was far from over.

The cut by Moody's highlights doubts about Greece's ability to solve its debt problems, sending Asian stocks lower on Tuesday and also halting the euro's rally.

But with the risk of Greek contagion already priced in, gold remains about 2.4 percent below a lifetime high of $1,251.20 struck last week.

Spot gold was at $1,220.20 an ounce by 12:08 a.m. ET, barely changed from New York's notional close on Monday, when it slipped around $3. Trading was thin with Chinese speculators away for the Dragon Boat Festival holiday.

For a graphic showing the spot gold technical outlook, see: here

When we look at the momentum indicators, it's traveling along quite nicely. It doesn't look overbought or sold on a relative strength basis, said Mark Pervan, senior commodities analyst at ANZ.

I think the downgrade of Greek credit ratings is a timely reminder not to sell gold. I think that in some degree, a lot of risk has been priced in, when you talk about Greece. This is just a reminder, rather than a new development I suspect.

A rally of the euro against the dollar faltered on Tuesday as investors booked profits and sentiment toward the single currency remained fragile.

U.S. gold futures for August delivery fell $2.0 an ounce to $1,222.5, extending Monday's fall.

Bullion rallied to a record high last week on worries that the European sovereign debt crisis is spreading and the U.S. economy may be slowing.

I think there's a bit of bargain hunting after the downgrade created uncertainty. But China is on holiday and there's World Cup fever...there's not enough liquidity in the market, said a bullion dealer in Hong Kong.

I think the market is still consolidating. There's support at $1,215 and $1,220, while on the upside, there's big resistance at $1,250, he added.

Oil was slightly higher above $75 on Tuesday as prospects for rising demand in emerging economies offset concern about the impact of Europe's debt crisis.

(Editing by Michael Urquhart)