Gold steadies off 3-month high as dollar ticks up

BENGALURU: Gold steadied off the previous day's three-month peak on Wednesday as the dollar firmed, but prices held at elevated levels after this week's drop in stock markets pointed to a weaker appetite for risk.

Spot gold was little changed at $1,230.32 an ounce at 1132 GMT. U.S. gold futures were down 0.3 percent at $1,233.20 an ounce.

On Tuesday, the precious metal touched its highest since July 17 at $1,239.68.

"Gold is focusing on the risk aversion creeping into the market, especially reflected in the weakness seen in global stock markets," said Saxo Bank analyst Ole Hansen.

"The $1,240 (level) from a technical perspective is quite significant, and if it breaks above $1,240, the next level could be $1,260."

Gold prices have gained more than 6 percent after falling to $1,159.96 an ounce in mid-August, their lowest since January last year.

"After reaching a three-month high yesterday, gold is taking a breath, but the price remains above the threshold of $1,230, confirming its strength," ActivTrades chief analyst Carlo Alberto De Casa said in a note.

"The environment remains positive for bullion, with growing investor interest for the precious metal (among those) betting on further corrections of stock markets increases."

World stocks steadied after falling for five straight days, pressured by earnings disappointment, concerns over Italy's budget and worries that world growth is losing steam.

Markets are awaiting British Prime Minister Theresa May's address to Conservative Party lawmakers later on Wednesday, as she seeks to calm growing tensions over her Brexit strategy.

The dollar index versus a basket of currencies rebounded 0.5 percent to 96.44, its highest since Aug. 17.

Dollar-denominated gold is often used as an alternative investment during times of political and financial uncertainty.

"If there is a correction, then $1,210 is a good support zone; breaching this support may lead gold to fall further towards $1,195, which is less likely in the current scenario," said Vandana Bharti, assistant vice president of commodity research at SMC Comtrade Ltd.

Palladium fell 0.5 percent to $1,135.22 per ounce after hitting an all-time high of $1,150.50 in the previous session, boosted by tight supplies, large deficits and fresh interest from speculative investors.

"As long as it stays above $1,100, I wouldn't be surprised if some additional momentum comes and takes it higher as liquidity is not great," Saxo Bank's Hansen said.

Silver was down 0.1 percent at $14.72 an ounce, while platinum slid 0.4 to $827.24 an ounce.