SINGAPORE: Gold steadied on Wednesday after two days of losses but the precious metal remained near its lowest in seven weeks as strong US factory data boosted optimism about economic growth, diminishing bullion's safe-haven appeal.
Physical demand from top consumer China rose slightly, with local prices trading at a premium to spot London prices for the first time since early March.
Though some in the market believe gold prices could head lower due to stronger equities, others say emerging physical demand and geopolitical tensions in Ukraine could support prices.
INTL FCStone analyst Ed Meir said a higher stock market would not necessarily drive money away from gold as the tone of the equities market remained nervous.
"In addition, although the Russian-Ukrainian situation is receding in terms of urgency, it certainly is not over given that Russian troops are still massed on the Ukrainian border," said Meir.
Gold is seen as an alternative investment to riskier assets such as equities at times of political and economic uncertainty.
"Short-term, the gold charts look negative, but we should note that prices are now approaching over-sold territory. We see prices trading between $1,250-$1,330 over the course of April," said Meir.
Spot gold edged up 0.3 percent to $1,282.16 an ounce by 0332 GMT, not far from its seven-week low of $1,277.29.
Prices fell 0.4 percent in the previous session after data showed US factory activity accelerated for a second straight month in March and auto sales surged, the latest signs the economy was regaining footing after a brutal winter.
Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 2.10 tonnes to 810.98 tonnes on Tuesday - the lowest since early March.
Among other precious metals, platinum rose nearly 1 percent on worries over supply constraints. Anglo American Platinum has sent force majeure notices to some of the suppliers to its South African mines, the world's top platinum producer said, underscoring the widening economic impact of an almost 10-week-old strike.
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