Gold steadied above $US950 per ounce on Thursday as the US dollar stayed near a seven-week low against a basket of currencies marked the previous day, maintaining bullion's allure as an alternative asset.
Earlier this month economic worries encouraged investors to buy the US dollar and US Treasuries instead of gold, dragging the precious metal's prices down towards $US900.
Now with signs of economic stability, market players' appetite for other assets including gold and equities is returning, traders said.
"Investors have a feeling that equity markets are on course for a recovery from recent lows... They are less risk-averse than before," said Dick Poon, manager of precious metals at Heraeus in Hong Kong.
"Now that they are buying stocks again, their focus is back on commodities markets as well," he said.
Spot gold was at $US952.50 an ounce in Asian trade, up 0.2 per cent from the notional New York close of $US950.40 on Wednesday.
US gold futures for August delivery edged down to $US952.70 an ounce, down 0.1 per cent from the previous settlement.
On Wednesday, the contract rose $US6.40 to settle at $US953.30 an ounce on the COMEX division of the New York Mercantile Exchange.
Bullion hit a five-week high of $US954.90 on Monday as a declining greenback and better US corporate earnings boosted bullion's appeal as an inflation hedge.
But Federal Reserve Chairman Ben Bernanke's remarks vowing to fight inflation earlier this week kept investors from becoming overly bullish on gold.
Its gains were also limited by selling to diversify assets from investors who had bought the precious metal at bargain prices.
Such selling has partly been behind the recent fall in holdings by the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, traders said.
The SPDR Gold Trust said holdings dropped by 5.8 tonnes or 0.5 percent to 1086.61 tonnes on Wednesday.
