Gold price held steady on Wednesday in Asia after dipping overnight, and looked likely to hold above $1,300 an ounce in the near term as geopolitical tensions from crises in Ukraine and the Gaza strip brought safe-haven bids.
But sluggish physical demand in Asia in the seasonally quiet summer period could weaken support for any price rally and even fail to provide a floor if prices were to decline.
Spot gold was little changed at $1,306.61 an ounce by 0627 GMT, after losing 0.4 percent in the previous session, pressured by firmer equities. U.S. gold edged up slightly to $1,308.40.
"We continue to expect gold to come under pressure this year, while keeping in mind the near-term potential for further safe-haven demand," Victor Thianpiriya, an analyst at ANZ, said in a note.
"Physical demand for gold continues to remain lacklustre... A significant fall in prices is required to spark renewed interest." A Reuters poll on Tuesday showed that analysts and traders expected gold prices to average $1,277 for the full year, as U.S. monetary policy returns to normal and Asian demand is weak.
Demand in Asia, home to major buyers China and India, has fallen off sharply after strong purchases last year, when gold prices slumped 28 percent.
Other than seasonality and above-normal purchases in 2013, the possibility of a further drop in prices is also keeping buyers away, dealers said.
Bullion, though, is currently getting good support from geopolitical tensions around the world. The metal is seen as an alternative investment to riskier assets such as equities.
Gold trimmed last week's losses after the downing of a Malaysian airliner over Ukraine, killing all 298 on board. U.S. officials say pro-Russian separatists most likely shot down the jet by mistake, not realizing it was a civilian passenger flight.
Tensions eased on Tuesday after a train carrying the remains of some of the victims arrived in Ukrainian government territory and separatist leaders gave Malaysian authorities the aircraft's flight recorders.
In the Middle East, the situation remained tense with Israel pounding targets across the Gaza Strip, saying no ceasefire was near as top