Gold prices steadied around $1,040 an ounce on Wednesday, staying above three-week lows hit the day before when the dollar strengthened against the euro. The euro moved away from 14-month highs hit against the dollar on Monday as investors also pared euro long positions on the view that the pace of its recent rise had been too fast.
Dollar weakness was the main driver for gold's rally when bullion rose above $1,072 to a record earlier this month, as a drop in the dollar makes bullion less expensive for non-dollar holders. Gold is also preferred as a hedge against inflation as well as a depreciating dollar. Traders and analysts said that given the rapid rise in gold prices, a pause in its rally was sensible, but the expected continuation of dollar weakness will also likely offer firm support around $1,000.
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