Gold prices were a tad higher on Wednesday as equity market weakness and an oil rally spurred investment into bullion, balancing out the negative effects of a firmer U.S. dollar.
Spot gold traded at $951.60 (U.S.) an ounce at 2:20 p.m. ET, up 0.1 per cent from its late Tuesday New York quote of $951.25 an ounce.
U.S. gold futures for June delivery settled unchanged at $953.30 an ounce on the Comex division of the New York Mercantile Exchange.
Weakness on Wall Street lifted gold from its session lows. Stocks were suffering from a retreat in risk appetite, which had sharpened on Tuesday after an upbeat report on U.S. consumer confidence.
"We might see a bit of risk aversion coming back after yesterday's good reading from the consumer confidence index," said Standard Bank analyst Walter de Wet.
"The markets probably overran a bit. It was a good figure, but it was only one figure," he said.
Analysts say gold may benefit from rising U.S. inflation, once the economy begins to recover. While at present the environment is still largely deflationary, this could change rapidly as economic activity picks up.
"Inflation is perhaps not the tune of this year, as demand remains weak despite all those green shoots," said VTB Capital analyst Ivan Ivanchenko. "But, given how fast the environment is changing, inflation may come much faster than many expect."
Buying in gold as an inflation hedge increased as U.S. crude oil futures climbed above a six-month high above $63 per barrel.
On the currency markets, the dollar strengthened after data showed U.S. existing home sales rose 2.9 per cent in April, against a fall of 3.4 per cent in March.
A firmer dollar generally weighs on gold, which is often bought as an alternative investment to the U.S. currency.
Trading strategies in the gold options market indicated long-term buying interest for the underlying futures, floor traders said.
Jonathan Jossen, a Comex gold options floor trader, said there was heavy buying of Comex December $1,200 call options, as well as increased writing of puts - an options strategy to profit from the upside.
Mr. Jossen also cited options buying from gold producers and higher open interest in gold exchange-traded funds.
Silver was at $14.82 an ounce, up 1.9 per cent from its previous finish of $14.55. It hit a session high of $14.99 - the highest price since August - on strong investment demand.
Among other precious metals, platinum was at $1,127 an ounce, down 0.4 per cent from its late Tuesday quote of $1,132, while palladium was at $222.50 an ounce, down 2.8 per cent from its previous finish of $229.
Both platinum group metals were pressured by fears over the outlook for car makers, as General Motors inched closer to bankruptcy.
The car industry accounts for half the annual consumption of platinum and palladium. Data showed European new commercial vehicle registrations fell 42 per cent in April, year-on-year.