SINGAPORE: Gold held steady in a narrow range on Thursday, as investors stood on sidelines and awaited a key Spanish debt auction later in the day amid worries that the euro zone debt crisis could flare up again.
Concerns about Spain's finances and banking sector pushed up safe-haven US Treasuries and German Bunds, and caution prevailed in most markets.
Gold, though traditionally seen as a haven during times of economic and political turmoil, has moved largely in tandem with riskier assets and against the dollar.
Spot gold was little changed at $1,640.29 an ounce by 0303 GMT, hovering in a $3 range around $1,640.
US gold edged up 0.1 percent to $1,641.40.
"The upside is very heavy because the euro remains under pressure and the weak physical demand isn't helping," said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.
"We might see prices test $1,600 level, which will attract some physical buying interest."
Technical analysis suggested that spot gold could fall towards $1,611.80 an ounce during the day, said Reuters market analyst Wang Tao.
Physical buying interest from the world's top two gold consumers, India and China, has been sluggish, even after a three-week strike by India's jewellers.
Gold prices are similar to those at the beginning of the year, the level of physical buying interest has fallen far below, dealers said.
"It makes me a bit nervous," said a Singapore-based dealer, "The confidence is not there given the uncertainties in general economic conditions, and people are waiting for lower prices."
In a step that was mildly supportive of gold sentiment, an unnamed central bank official said China would increase liquidity via open market operations and cutting banks' required reserves to steer the economy towards a soft landing.
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