Singapore: Gold clung to overnight gains on Wednesday as Asian shares retreated, but investors remained cautious amid a firmer dollar and upbeat U.S. manufacturing data that kept prices near their lowest since January.
U.S.-led strikes against militants in Syria failed to spur follow-through safe-haven demand for gold after small gains on Tuesday. Gold is traditionally seen as a safer bet during times of political uncertainty.
The tensions in Syria, however, curbed appetite for risky assets, sending Asian shares lower.
Spot gold was holding steady at $1,223.40 an ounce at 0359 GMT. It had gained 0.7 percent in the previous session as the dollar fell on profit-taking after 10 weeks of gains.
But the dollar index was still trading near a four-year peak on Wednesday.
"The trend is still bearish for gold right now," said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.
"The dollar is very strong and will continue to put some pressure on precious metals," he said.
"More so, as physical demand is not strong enough to support prices."
Sluggish physical demand in Asia could weaken support for any price rally and would fail to provide a floor if prices were to decline.
The fourth quarter is usually a strong period for demand in Asia as consumers in China and India buy for festivals and weddings. But expectations of a further price drop could keep some away.
Investor interest in gold also remains weak. SPDR Gold Trust, the world`s top gold-backed exchange-traded fund, said its holdings fell 1.2 tonnes to 773.45 tonnes on Tuesday - the lowest since December 2008 and third straight drop.
While the dollar strength has been a major factor in recent days for the weakness in gold, strong U.S. economic data - which has fuelled speculation of an earlier-than-expected rate hike - has also hurt.
Data on Tuesday showed that U.S. manufacturing activity hovered at a near 4-1/2 year high in September and factory employment surged, supporting views of sturdy economic growth this quarter.
The technical picture also looked bleak for gold, with traders expecting prices to dip below the key psychological level of $1,200 an ounce.
