SINGAPORE: Gold edged higher on Wednesday, its third day of gains in four, but a lack of buying support from Asia, a strong US dollar and firmer equities due to hopes of more stimulus from the European Central Bank are expected to check any big upside for the metal.
Bullion has struggled in August to decisively break above the psychological level of $1,300 an ounce as speculation grew about an earlier than expected increase in US interest rates.
On Wednesday, gold added 0.2 percent to $1,283.70 an ounce by 0318 GMT, having jumped about 1 percent on Tuesday on chart-based buying before paring gains.
Prices hit a two-month low of $1,273.06 on Aug. 21 but are still up more than 6 percent this year.
"The market is still very cautious. The physical side is not as good as in the previous month and even last year," said Brian Lan, managing director of retailer GoldSilver Central Pte Ltd in Singapore. "What we are seeing is a lot of speculative trading by the bigger players and hedge funds.
Gold is still within the trading band," said Lan, adding that short-term technical support for the metal was at $1,275 while resistance was still $1,300.
US gold was flat at $1,284.90 an ounce.
The US dollar held just under a 13-month peak against a basket of major currencies early on Wednesday, with the euro still struggling amid expectations of further policy easing from the European Central Bank.
A firm US dollar makes dollar-priced bullion more expensive for holders of other currencies, and some speculators also turned to equities following the release of US data on durable goods and consumer confidence.
Speculation is growing that the European Central Bank is preparing a programme of large-scale asset purchases to weaken the euro and try to jump-start growth in the struggling euro zone.
"We suspect that we likely see pressure resume on gold going into the balance of the week, as Tuesday's move did not look all that convincing to us," said INTL FC Stone in a report.
Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund and a gauge of investor demand, fell 0.4 percent to 797.09 tonnes on Monday from 800.08 tonnes on Friday.
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