LONDON—Gold held steady in Europe Wednesday and market participants said they expect prices to stay that way for the next couple of days given that investors are starting to become desensitized to developments in the euro zone.
Support is coming from a weak U.S. dollar and continued concerns over Europe's sovereign debt load, but a "more sober" approach towards the broader economic situation has put the metals' ascent on pause, traders said.
Spot gold is trading at $1,235 a troy ounce, up 0.08% from Tuesday's close.
But with fears growing over not only Spain's finances amid talk it may need funds from the €750 billion ($926 billion) euro-zone support package going forward, as well as worries over public debt in Portugal, investors will continue to look at gold as a better bet than currencies and equities.
"Even though markets in general seem to have adapted to the flow of bad news coming out of Europe and tend to have a more sober approach to it, the situation continues to deteriorate, thereby limiting the downside risk in the gold market," SEB commodity strategist Filip Petersson said.
Mr. Petersson said the sluggish U.S. dollar had regained some importance in boosting gold prices after a period when investors seeking an alternative to a declining euro had been in focus. "A weakening dollar appeared to support the gold market yesterday. However, both factors are likely to be important influences going forward," he added.
The effects of a downgrade of Greek debt to junk status by Moody's rating agency Monday are also lingering, and analysts noted volumes remain relatively subdued as the Chinese market remain closed for the three-day Dragon Boat holiday.
VTB Capital analyst Andrey Kryuchenkov said he expected little to change in the market in the coming days. "It may come off to about $1,215 an ounce, but I generally think it will hold," he said.
In other precious metals, spot silver was trading 0.2% higher at $18.56 an ounce. Spot platinum was 0.18% higher at $1,572.9/oz and spot palladium remained unchanged at $469 an ounce.
