SINGAPORE, Dec 11 (Reuters): Gold reversed early gains to move further away from a seven-week high on Thursday as the dollar got some respite against the yen, dulling the metal's appeal as a hedge.
Bullion, seen as an alternative investment to riskier assets such as equities, gained earlier in the session as Asian stocks dipped on global growth concerns, along with a softer dollar.
Weakness in oil prices has weighed on sentiment. Though energy prices ticked higher on Thursday, they were still close to five-year lows.
Gold tends to fall in tandem with oil as weaker energy prices dull the metal's appeal as a hedge against oil-led inflation.
"It is good that gold is able to stay above $1,200 despite another slump in oil prices. But it is a little bit concerning we haven't been able to build on it with the dollar weakening quite a bit," said a Hong Kong-based precious metals trader.
"If we stay near $1,230 for a while without making any progress, it might turn out to be bearish," the trader said.
Spot gold had eased 0.2 per cent to $1,224 an ounce by 0743 GMT. The metal rose to a seven-week high of $1,238.20 on Wednesday, but failed to hold on to those gains and ended the day down 0.3 per cent.
Safe-haven demand and short covering have been behind gold's recovery from four-and-a-half-year lows hit last month.
An improvement in sentiment was seen in the holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund. The fund saw inflows of nearly 3 tonnes on Wednesday, bringing total holdings to 724.80 tonnes.
That was the fund's second straight day of inflows but holdings are still firmly near six-year lows.
"Should a combination of low oil and shaky equities plus increasing currency uncertainty promote investor risk aversion, then gold may gain on renewed safe-haven buying, especially if there is even a hint of fresh sovereign risk concerns," HSBC analysts said in a note.
