LONDON—The spot price of gold stabilized, but silver prices resumed their fall a day after prices for both metals climbed.
Analysts and traders reported strong interest in gold from physical buyers, and volumes through the Shanghai Gold Exchange have risen to their highest level since January, when Chinese New Year demand boosted turnover.
Ahead of the New York day, spot gold was up $2, or 0.1%, at $1,651.70 a troy ounce. Spot silver was down 76 cents, or 2.4%, at $31.12 an ounce.
But signs of division in Europe over the methods needed to help Greece through its funding crisis weighed on investor sentiment. While the gold market has in recent months benefited significantly from economic uncertainty in the euro zone, that hasn't been the case in many recent sessions.
The metal's price has recovered by about $120 since hitting a 2½-month low of $1,532.01 an ounce Monday. However, UBS analyst Edel Tully warns this week's price rebound "does not have a watertight foundation."
"A return of dollar strength and a renewed rush out of risk assets could send the precious metals complex lower," she said.
Buyers remained very visible across much of Asia, she said, and physical premiums are subsequently moving higher.
Within India, high demand is now likely to persist as local dealers stock up ahead of the festival season.
India's gold demand during the peak festival season is expected to rise by around 65% to around 150 metric tons, with the recent slide in prices together with good monsoon rains driving up rural purchases, the president of the Bombay Bullion Association said Wednesday.
Demand during the festival season last year was around 90 tons.
"This week alone, the demand is expected to be around 100% more than last week," Prithviraj Kothari told Dow Jones Newswires.
Gold and silver buying usually peaks around the festival of Diwali, which will be celebrated on Oct. 26 this year.
Among other metals, spot platinum was up $5, or 0.3%, to $1,558 an ounce, while spot palladium added $3, or 0.5%, to $649 an ounce.
—Biman Mukherji in New Delhi contributed to this article.
Write to Rhiannon Hoyle at rhiannon.hoyle@dowjones.com
