Gold steadied on Thursday to trade near its highest in more than a month, as the dollar and European shares weakened on worries over the strength of the global economy, sending investors in search for assets perceived as safer.

Spot gold was unchanged at $1,241.40 an ounce by 0928 GMT. The metal rose to its highest since September 11 at $1,249.30 in the previous session.

US gold futures

US gold futures also hit a one-month high on Wednesday and were trading down $3.60 an ounce at $1,241.30.

The dollar was down 0.2 per cent against a basket of main currencies, while European shares extended the previous session’s selloff, when they shed 3.2 per cent to score their biggest one-day slide in almost four years.

“With all the global growth worries, you’d have to bet that gold holds its own here and may look to test $1,250 and higher depending on what the US stock markets do this afternoon,’’ Societe Generale analyst Robin Bhar said.

“Clearly we need to see the lows in the share markets hold today to make all these concerns coming back in a very forceful way, which will only help gold,’’ Bhar added.

US Treasury yields

Flight from risk resulted in a massive rally in US Treasury bonds, pushing the benchmark 10-year note’s yield as low as 1.865 per cent on Wednesday, its lowest since May 2013.

Returns from US bonds are closely watched by the gold market, given the metal pays no interest.

US retail sales, producer prices

Investors were spooked by a drop in US retail sales in September, while producer prices dropped for the first time in more than a year.

Sluggish US data added to concerns voiced by some Federal Reserve policymakers about the broader economic outlook, which could delay a hike in interest rates.

China’s inflation

The disappointing numbers followed data from China that showed a drop in inflation to a five-year low. The United States on Wednesday renewed a warning that Europe risks falling into a downward spiral of dropping wages and prices.

Despite the recent gains and a brighter technical picture, concerns still lingered over how much further gold could climb after the metal was unable to maintain all of its gains in the previous session.

SPDR Gold Trust

Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund and a proxy for investor sentiment, fell 0.27 per cent to 759.14 tonnes on Wednesday.

Physical demand, which usually provides a floor for prices, also seemed to have eased with the price gains. Premiums in top buyer China had fallen to between $1 and $2 an ounce from about $4 in the previous session.

The fourth quarter is typically a strong period for gold demand in major buyers China and India due to festivals and an increase in weddings.

Among other precious metals, silver was up 0.2 per cent at $17.42 an ounce, while spot platinum fell 0.6 per cent to $1,247.25 an ounce and spot palladium lost 0.2 per cent to $761.22 an ounce.

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