Singapore - Gold rebounded from lows on Thursday as bargain hunters resurfaced after prices struggled to revisit a lifetime high set in June, although firmer equities were likely to cap gains.
Asian stocks edged up to track a small rally on Wall Street, while the euro gained after successful European bond auctions gave investors an excuse to lighten up on their bets, but worries about financial stability in Europe lingered.
Spot gold added $2.25 to $1 256.75 an ounce by 05:35, after hitting a low of $1 252.80 an ounce in thin trade. Bullion had risen as high as $1 262.25 on Wednesday, not far from a lifetime high around $1 264 hit in June.
"I think sentiment is still bullish right now," said Dick Poon, manager at Heraeus in Hong Kong. "The market is only consolidating." Bullion was still on track to test new highs, he said.
Gold had struck a lifetime high on worries the debt crisis in Europe was spreading, while recent economic data from the United States failed to ease worries the economy was slowing.
The US economy has shown "widespread signs" of slowing over recent weeks, the Federal Reserve said on Wednesday in a report suggesting that while the recovery has been faltering, the economy may skirt a second recession.
Dealers ignored declines in Chinese commodity futures, saying that bullion was partly driven by wild movements on the Tokyo Commodity Exchange, especially during the morning session. The most active contract on the Shanghai Gold Exchange was barely changed.
Chinese commodity futures prices slid on Thursday in a widespread sell-off that several market participants linked to an investigation into trading on the Shanghai rubber market.
After the market opened, futures prices for zinc, copper, aluminium, soybeans, soyoil, soymeal and cotton all fell. By the midday break, all the main commodity futures were down by more than 1%.
US gold futures for December delivery were steady at $1 258.2 an ounce. It had risen to $1 264.70, its highest since June 28, on Wednesday before losing some of the gains to profit-taking.
"It looks like the market is a bit unstable or a bit mixed. There's a big drop this morning but then the market surged again," said a physical dealer in Singapore.
"We are seeing selling from Vietnam but Thai is mixed. I mean they are both buyers are sellers. Demand from India was strong yesterday."
Demand in India, the world's largest consumer, rises during the festive season, beginning with Raksha Bandhan in August and lasting through November with Dhanteras - the single-biggest gold buying day.
In the energy market, oil pared gains on Thursday to stay below $75 as Chinese commodity futures tumbled in a widespread sell-off.