Gold prices remained stable on Wednesday in Asia after soaking overnight, and seemed likely to hold above $ 1,300 an ounce in the short term because of ongoing concerns about crises in Ukraine and Gaza.
But the weak physical demand in Asia over the summer period in quiet season could undermine support for any price rises and even stop providing a floor if prices were falling.
Spot gold little changed at $ 1,306.61 an ounce by 0627 GMT, having lost 0.4 percent in the previous session, under pressure from stronger equities.
In the USA Exchange, gold for August futures delivery fell by 0.08% or $ 1.00, to trade at $ 1307.70 a troy ounce during early European morning hours. Prices took place in a narrow range between $ 1305.60 and 1309.30.
Futures were likely to find support at $ 1298.10, the session low of July 17 and resistance at $ 1,325.50, the session high of July 18.
A Reuters survey on Tuesday showed that analysts and traders expected that the prices of gold to average $ 1,277 for the entire year as return monetary policy to normal and demand from Asia is weak.
Demand on Asia, home to major buyers from China and India, has down sharply after heavy purchases last year, when the prices of gold plummeted 28 percent.
Apart from seasonality and higher than normal in 2013 purchases, the possibility of a further decline in prices is also maintaining buyers away, traders said.
Bullion, however, currently receiving well supported by geopolitical tensions in the world. The metal is seen as an alternative to riskier assets such as equities investment.
Gold remained supported as tensions between Russia and the West remained high a result of the bombing of a passenger airplane Malaysia in eastern Ukraine last week, while Israel’s ground offensive in Gaza was also targeted.
SPDR Gold Trust said its holdings rose 1.5 tonnes to 804.84 tonnes on Tuesday to demand safe haven assets.
Gold futures prices on MCX were also trading with marginal gains on Wednesday early morning trade session. MCX Gold October futures contract was trading at Rs 28065 up Rs 94, or 0.34 percent. Gold touched a session high of Rs 28065 and a session low of Rs 27991.