Gold prices steadied on Tuesday after plunging more than 4 percent in recent sessions, but remained under pressure as the dollar touched a three-month high on firming expectations of an interest rate hike.

In Europe, bond yields fell as attention returned to central bank buying after weeks of Greek-related distractions, while stocks dipped on weak earnings results from drugmakers.

"Greece may be easing us into the quieter summer months, however there is still plenty to focus on in the markets, with commodities grabbing plenty of attention," said Craig Erlam, a senior market analyst at Oanda.

"Meanwhile, earnings season is also well underway and could prove key in determining whether we will see rate hikes this year and companies attempt to weather the strong dollar storm."

Euro zone bond prices rose broadly on Tuesday, with yields on 10-year Italian debt down for their eleventh day -- their best run since the summer of 2008.

Strategists said demand for bonds was being supported by cash from debt redemptions and purchases from the European Central Bank under its quantitative easing programme, both of which were having more of an impact in holiday-thinned trading.

The FTSEurofirst 300 index of top European shares was down 0.3 per cent at 1,609.57 points after rising to a six-week high in the previous session.

The healthcare sector lead the market lower after Novartis reported quarterly income below analysts' expectations.

"There's not a lot of conviction in the move higher. Maybe it's because we've had such a rapid rally since the start of July that the bulls need a breather, or that equities valuations are starting to look a little toppy," Jonathan Sudaria, a dealer at Capital Spreads, said in a note.

MSCI's broadest index of Asia-Pacific shares outside Japan was last up about 0.5 per cent, after wavering between positive and negative territory for much of early trading.

China stocks extended gains as government rescue measures appear to have restored some stability to trading.

Japan's Nikkei share index ended up 0.9 percent as markets reopened after a public holiday on Monday, reaching a nearly four-week highs on growing expectations for strong first-quarter earnings.

Spot gold added about 1 per cent on the day to $1,107.49 an ounce, recovering after a sharp slump.

Demand for safe havens such as gold have waned as Greece this week paid off its creditors, reopened its banks and submitted legislation needed to start talks on a multi-billion euro rescue package.

Dollar index edges up to fresh highs

Investors have found less incentive to hold gold, as the dollar strengthens ahead of an expected increase in US interest rates later this year, the first in nearly a decade.

St. Louis Fed President James Bullard said on Monday there was a better than 50 per cent chance that the US central bank will raise interest rates in September.

The dollar jumped to its highest since April 23 against a basket of major currencies in early European trading.

The euro edged up slightly on the day to $1.0857, after dipping to its lowest since mid-April overnight.

The dollar was up slightly against the yen, to buy 124.35 after earlier touching a six-week peak of 124.48 yen.

Crude oil continues to skid

In other commodities trading, crude oil futures continued to slip, pressured by the strengthening dollar and concerns about a supply glut.

US August crude, set to expire later on Tuesday, was down about 0.4 percent at $49.94 a barrel, back under the $50 threshold after it tumbled below it for the first time since April on Monday.

Brent crude slipped 0.2 percent to $56.52.

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