Gold steadied below $1,200 an ounce on Tuesday after its biggest one-day loss in a week, under pressure from a rising dollar and a rally in global equities, which diverted some interest from the metal. European stocks rose 0.6 percent and Wall Street opened higher as upbeat corporate earnings lifted global equities, offsetting a mixed German business confidence survey and rising worries about a possible Greek default.
Spot gold was $1,195.20 an ounce at 1332 GMT, little changed from where it ended Monday. US gold futures for June delivery were up $1.10 an ounce at $1,294.80. "Gold was being weighed down yesterday by the firmer dollar and the rising equity markets, and these two factors are (still) preventing gold from regaining the $1,200 mark," Commerzbank analyst Daniel Briesemann said.
Worries about Greece pressured the euro, with the single currency falling across the board as details emerged of a European Central Bank proposal to increase the insurance it would demand in return for emergency funding to Greek banks. The dollar rose 0.5 percent against the euro. Gold prices have been weighed down this year by expectations that the Federal Reserve is preparing to increase interest rates for the first time in nearly a decade.
That would boost the dollar and lift the opportunity cost of holding non-yielding gold. Until further clarity is received on the outlook for US rates, gold is likely to struggle for direction, analysts said.
"Overall uncertainty on the timing and pace of Fed tightening adds to investors' reluctance to put on sizeable positions at this point," UBS said in a note on Tuesday. Physical demand in China, the second-largest gold consumer, was lacklustre overnight, traders said, with precious metals house MKS reporting "low turnover and modest price action" in Asian trading hours.
Traders were also watching physical demand in top consumer India, which on Tuesday celebrated the Akshaya Tritiya festival, considered one of the most auspicious days to buy gold. Supply of the metal into India rose sharply in the build-up to the festival, but it remains to be seen if consumers will buy with their usual enthusiasm after a drop in gold prices. Silver was up 0.4 percent at $15.96 an ounce, while platinum was flat at $1,144.50 and palladium rose 0.3 percent to $771.69.
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