Gold steadied above $US910 an ounce on Wednesday as investors waited for more clues on the state of the US economy, but a rally in the stock market also prompted investors to shift some of their money back to shares.
The US Federal Reserve, which ends its two-day meeting on Wednesday, is expected to renew a vow to do whatever it can to pull the economy out of a painful recession. Investors want to know if the central bank will announce plans to buy long-dated Treasuries to keep long-term rates low.
"We want to see if the economy is improving or not. If it is improving, then there will be some pressure on gold because it's no longer seen as safe haven," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
Gold was trading at $US914.10 an ounce, barely hanged from New York's notional close on Tuesday, when it slipped 0.7% after a surprise surge in US housing starts pushed up US stocks, giving investors reason to raise their tolerance of risk.
Gold hit an intraday low of $US910.60 on earlier Wednesday as the Nikkei hit a five-week high to track a rally on Wall Street, with bank shares boosted by moves by the Bank of Japan to bolster banks' capital.
Bullion has dropped 9% since hitting an 11-month high above $US1000 an ounce in February after investors booked profits and sales of scraps intensified as holders sold back jewellery and coins for cash. Gold struck record at $US1030.80 last March.
But record holdings on the exchange-traded funds suggested long-term outlook for the metal remained bright despite persistent selling at higher levels, said dealers.
Holdings on the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, were unchanged at 1069.05 tonnes as of March 17, a record amount first marked the previous day.
"The consumer fabrication demand for gold remains weak. I suspect that's a negative (factor) for gold. So for gold to rise, it really needs quite solid investment inflows into it," said David Moore, commodities strategist at Commonwealth Bank of Australia in Sydney.
"I think it's certainly possible for gold to go back to $US1000. The conditions that pushed the gold price high can occasionally reoccur. I think the international economic enviroment is still troubled."
In other markets, currencies traded in tight ranges as investors awaited the outcome of a Bank of Japan policy meeting and a Federal Open Market Committee meeting later in the day.
The euro held near a recent one-month high on the dollar.
Oil fell towards $US48 a barrel on Wednesday, surrendering some of the previous day's gains, as industry data late on Tuesday showed US crude inventories rose much more than expected last week.
