Gold eased for a second session on Wednesday as the dollar and equities edged up after sharp losses, but lingering worries over the global economy could support the safe-haven metal.
Spot gold had slipped 0.5 percent to USD 1,226.35 an ounce by 0623 GMT. The metal hit a four-week peak of USD 1,237.90 on Tuesday, before paring gains to close the day 0.4 percent lower.
Asian stocks regained a semblance of stability following days of steep losses, but sentiment remained fragile as benign Chinese inflation data and gloom in the euro zone economy added to signs of a faltering global economic recovery.
The modest strength in the dollar is pressuring precious metals, said Jason Cerisola, a metals dealer at MKS Group.
"But the overall 'risk off' mentality in the markets at present should provide a bid to the (precious metals) complex alongside the lower US yields," Cerisola said in a note.
"Gold is likely to remain range-bound with a break of either USD 1,220 or USD 1,240 needed for the next leg in either direction."
Bullion has been well-bid since last week on increasing concerns over the health of the global economy. Global equities tumbled, while the economic uncertainty and its potential impact on US monetary policy sent the dollar lower, boosting gold's appeal as a hedge.
Economic data from Europe continued to be weak, a factor that could keep gold prices supported despite the short-term losses.
The German government sharply lowered its growth forecasts for this year and next, euro zone industrial production tumbled in August, and a closely watched German economic sentiment index registered its first negative reading since November 2012, at the height of the euro zone crisis.
US economic data later in the day could provide further cues for gold prices.
Meanwhile, gold was also getting some support from physical markets.
India's September gold imports nearly doubled to USD 3.75 billion from the month before, ahead of the country's wedding and festival season, showing increasing appetite in the world's second biggest gold consumer.
In top buyer China, physical trading activity remained strong as seen on the Shanghai Gold Exchange, with premiums holding at about USD 4 an ounce.
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