Gold prices ticked higher in Europe on Wednesday, although traders expected them to remain range-bound due to uncertainty about the impact of Hurricane Katrina on US economic growth. By 1554 GMT, spot gold was at $445.00/445.70 a troy ounce, modestly higher than New York's late quote on Tuesday of $444.05/444.75.
Traders said gold was pausing with oil now back down to pre-Katrina levels and with the dollar steadier. "The key driver behind the recent rally in gold is the (euro/dollar), in turn a manifestation of market views on interest rates and economic outlook," Barclays Capital said in a daily report.
It expected nervous conditions to remain, which would likely keep spot gold in a $440-447 range." Any further dollar weakness would boost gold, with some looking for it to take out the high for the year, scored in mid-August, at $449.30.
Prices had lost more than one percent since then. Jeremy East, global head of precious metals at Commerzbank, noted euro-denominated gold had risen. Gold in euros was trading at 357.92 having earlier risen above 358 euros to its highest in some 10 days.
"It's interesting as the dollar has strengthened over the past day, but (dollar) gold is steady as well," he said. A firmer US currency would usually make dollar-denominated gold more expensive for overseas investors.
Analysts and traders have also been eyeing a hefty net long speculative position that has built up on the New York gold futures market since last month.
But an increasing number of market participants felt the immediate prospect of liquidation was fading after funds stepped back in last week.
"They have plenty of cushioning and they're not under pressure. I think the market is really looking quite good," East said. The dollar stabilised having fallen earlier to within striking distance of last week's three-month low before erasing losses to $1.2445 by 1448 GMT.
The market will now take a close look at the Fed's Beige Book, which outlines business conditions across the United States, and a speech by the Fed Bank of Chicago President later in the day.
Silver firmed to $7.06/7.09 from $7.02/7.05. Platinum slipped to $905.00/909.00 from $907.00/911.00, while palladium was unchanged at $182.00/185.00.