Tokyo - Gold inched down on Thursday, posting its third straight day of losses, as a steady dollar dulled some of bullion's sheen, but it remained within the previous session's range on weaker equities.
Market participants said gold was moving inversely to the US dollar, and that any bounce in the currency was likely to weigh on the precious metal, as investors view gold as a currency hedge.
"(Gold's direction at the moment) really depends on how the dollar pans out, especially after the bout of selling on concerns that the US credit rating may be affected by the large amount of debt the US has," said Adrian Koh an analyst at Phillip Futures.
Moody's Investors Service affirmed its top credit rating for the United States on Wednesday, but warned that if the US failed to reduce current debt levels once economic growth returns, the credit grade could eventually come under pressure.
Gold was at $946.85 per ounce at 03:06 GMT, down 0.1% from New York's notional close of $948.10.
US gold futures for June delivery were at $946.70, down 0.7% from settlement on the COMEX division of the New York Mercantile Exchange.
The dollar held steady against the euro on Thursday, having pulled up from five-month lows hit against the single European currency last week due to short-covering.
The dollar rose 0.4% against the yen to ¥95.69.
A spike in US Treasury yields triggered a selloff in equity markets on Wednesday, as investors feared rising funding costs might delay a potential recovery in the world's largest economy.
Phillip Futures' Koh said he believed gold had the potential to move higher from a technical point of view.
"I am still positive on gold should we head higher and break above the previous highs of $960," he said.
"However, for that to happen, the $940 support will have to hold and if it doesn't, then we may see a continuation of the retracement in gold prices," he said.
The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said its holdings stood at 1 118.76 tonnes as of May 27, unchanged from the previous day.
Gold markets appear to have largely factored in news that General Motors appears close to a bankruptcy filing, which would be the largest ever for a US industrial company.
On Wednesday, GM said a bond exchange offer had failed to win support from investors holding $27bn of its debt.
However, the report has weighed on platinum and palladium, which are affected by news from the auto industry due to their heavy use as autocatalysts, needed to clean exhaust fumes.
- Reuters