LONDON: Gold steadied on Wednesday as concerns of increasing military action along the Ukraine border put global equities under pressure, raising demand for assets perceived as an insurance against risk, but a stronger dollar kept gains in check.
Russia has amassed around 20,000 troops on Ukraine's eastern border and could use the excuse of an humanitarian or peacekeeping mission to send them into Ukraine, NATO said in a statement on Wednesday.
Spot gold gained 0.1 percent to $1,288.74 an ounce by 1003 GMT. The metal fell to its lowest since June 19 at $1,280.40 last week, steadying just above that level since.
U.S. gold futures for December delivery were up $6.40 at $1,291.70 an ounce.
"There is a modest underlying fundamental weakness to the gold market that tends to see it drift down but it's not powerful enough to offset sporadic geopolitical buying," Macquarie analyst Matthew Turner said.
Bouts of international political tensions, mostly in Ukraine and the Middle East, have partly been responsible for gold's seven percent gain year to date, as these have reduced investors' appetite for risk.
European stocks fell, also pressured by data showing German industrial orders fell in June at their steepest rate since September 2011, with the economy ministry saying international political concerns had probably led to more cautious ordering.
Risk aversion and upbeat U.S. economic data, which included a spike in service-sector activity to a nine-year peak and a uptick in factory orders, have however helped lift the dollar to an 11-month high against a basket of major currencies.
A stronger U.S. currency makes dollar-denominated assets like gold more expensive for other currency holders.
Bullion investors will continue to monitor U.S. data releases after last week's mixed readings showing second-quarter gross domestic product rebounded sharply but jobs growth in July slowed.
"Gold could face difficulty breaking through $1,300 because the dollar is doing really well," said Chen Min, a precious metals analyst at Jinrui Futures in Shenzhen.
"The only supporting factor is geopolitical tensions, and unless tensions escalate drastically over Ukraine, gold won't be able to gain much."
The physical markets have failed to provide support to prices recently due to the seasonally quiet summer period.
Premiums in top buyer China have been stuck at $2-$3 an ounce and demand is much weaker than last year, dealers said.
Chinese gold jewellery demand fell for the first time in eight years in the second quarter and could drop as much as 20 percent in the full year, a leading precious metals consultancy said last week.
In other precious metals, silver ticked up 0.6 percent to $19.79 an ounce after dropping to a seven-week low in the previous session on strong U.S. data and a higher dollar.
Platinum gained 0.2 percent to $1,449.50 an ounce, while palladium was flat on the day at $844.22 an ounce.
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