NEW YORK/LONDON Gold turned higher on Tuesday but hovered beneath the previous session's 7-1/2-month high of $1,200 an ounce, buoyed by risk aversion as equities remained volatile and the dollar extended losses.
Fears the global economy could tip into recession and worries about banks battered share markets for the third straight day, helping gold gain more than 7 percent since the start of last week as investors sought a safe haven.
The U.S. dollar tumbled to a nearly four-month low against a basket of major currencies, further supporting bullion prices.
Analysts said the metal looked overbought and fell short of testing key psychological resistance at $1,200 an ounce, attracting profit-taking earlier in the session.
"We need a stabilization in stock markets and as long as that does not happen, risk aversion will remain elevated and very supportive (for gold)," said Commerzbank analyst Carsten Fritsch.
Spot gold was up 0.1 percent at $1,192.30 an ounce at 2:12 p.m. EST (1912 GMT), below the session high of $1,198.90 and Monday's 7-1/2-month peak at $1,200.60 on Monday.
U.S. gold for April delivery settled up 70 cents at $1,198.60 an ounce.
Strong demand for safe assets was underscored when the yield on Japan's benchmark 10-year government bond turned negative for the first time on Tuesday.
"(Gold) absorbed a decent amount of profit taking and liquidation, and it stood up well absorbing it," said James Steel, chief metals analyst for HSBC Securities in New York, about earlier market weakness.
"I think that ($1,200) is a big psychological level and the market was due for some kind of correction or at least a hiatus in the rally."
Also preventing prices from climbing higher was weak demand in Asia with China's markets closed for the Lunar New Year holiday this week.
"For the time being we continue to see the safe-haven demand being supportive for gold," said Citigroup analyst David Wilson.
Markets will be watching for any clues on monetary policy when Federal Reserve Chair Janet Yellen appears before the House Financial Services Committee on Wednesday and Thursday.
Also supporting bullion prices are surging inflows into gold exchange-traded funds, which have seen the biggest buying spree in nearly five years.
Platinum was up 1.4 percent at $934.20 an ounce, after rising to a three-month peak at $937.50.
Spot silver was down 0.3 percent at $15.26 an ounce, while palladium rose by 0.5 percent to $515.60 an ounce.
(Additional reporting by Manolo Serapio Jr. in Manila; Editing by Mark Potter, David Evans and Andrew Hay)
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First Published On : Feb 9, 2016 19:50 IST