Gold steadied on Wednesday after hitting a two-month high the previous day, with investors pondering whether to push prices up if the US dollar weakens further as they become more wary of high price levels.
After breaking above a key resistance level that had held for most of this year on Tuesday, and with other commodities such as oil and base metals gaining strongly while Asian stocks and the euro hit year-highs, gold is on an uptrend as funds pour money into a broad range of assets.
By some technical measures, such as gold's relative strength index (RSI), the market is becoming top-heavy while players are growing cautious about liquidity thinning out during the summer holidays, which could mean sharper swings in prices.
The RSI, a measure of whether the metal is overbought or oversold, stood at around 69. The market views an RSI of 30 or less as oversold and 70 or more as overbought.
The index topped 70 when the spot market tested resistance of $US955-$US960 per ounce in the past three weeks, but held above that level for just a few days when the spot rate neared $US1000.
"Market momentum is clearly on an upswing, giving an upper hand to trend technicals over an oscillator analysis such as RSI," said Shuji Sugata, a manager at Mitsubishi Corp Futures and Securities.
"Stabilising markets across assets reduce gold's attraction as a safe haven, as reflected in falling gold ETFs, but such a negative aspect is overshadowed by the focus on speculative funds flowing into markets broadly," he said.
Spot gold was down 0.2 per cent at $US965.20 per ounce in Asian trade, compared to New York's notional close of $US966.75 per ounce. Spot gold rose to a two-month high of $US970.05 on Tuesday.
US gold futures for December delivery fell 0.2 per cent to $US967.80 per ounce, compared with $US969.70 an ounce on the COMEX division of the New York Mercantile Exchange. Gold futures rose above $US970 to a two-month high on Tuesday.
Sugata said gold would likely keep drawing support from the euro's continuing strength after it topped $US1.43.
