Gold gained on Thursday after holdings in the SPDR Gold Trust rose again, showing that investors remained faithful to the metal in light concerns about the global economy and volatile equity markets.
Spot gold rose 75 cents to $1,228.30 an ounce by 0257 GMT after trading as high as $1,230.70 -- not far from a 1-½ month high of $1,232.35 an ounce hit on Wednesday.
A pick up in physical demand in main consumer India during the festive season is seen supporting prices, but gold remains vulnerable if investors have to sell positions to cover any sharp fall in equity markets caused by continued scepticism about the global economic recovery.
"There are still rumours of uncertainty, and problems within Europe are rising again which is going to help underpin gold. We've also got the physical gold market looking to pick up in the weeks ahead," said Darren Heathcote, head of trading at Investec Australia in Sydney.
"We are gradually going to move higher, but it's not a full-on strong bull market at the moment," he added.
For now, gold prices remain supported by a gain posted in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, which said its holdings rose to 1,295.516 tonnes by Aug. 18 from to 1,294.604 tonnes on Aug. 17.
The holdings hit a record at 1,320.436 tonnes on June 29.
U.S. gold futures for December delivery were steady $1,230.8 an ounce, having hit a high of $1,234.40, the strongest since July 1.
Cash and gold futures struck a record in June on worries the debt crisis in Europe was spreading and the U.S. economy was slowing.
The Nikkei inched up on bargain hunting on Thursday and also to track gains in the Wall Street, but the yen's strength against the dollar kept further gains in check.
The dollar held steady against the yen above a 15-year low hit last week, drawing some support from a media report that the Bank of Japan has started considering additional monetary easing measures. The euro slipped against the dollar.
In the physical market, dealers saw sales of gold scrap slip because of high prices, but there was also buying from jewellers at lower levels.
"I must say there's much going on but it seems everybody is waiting for the price to get higher to sell," said a dealer in Hong Kong.
Crude was under pressure on Thursday from brimming U.S. petroleum inventories, after prices rebounded from a six-week low a day earlier.
