Gold up on lower shares but strong dollar weighs

Gold rose on Wednesday, following two straight sessions of losses, helped by lower European shares but a stronger dollar ahead of major US economic data weighed.

Spot gold was up 0.3 per cent at $1,207.10 an ounce by 1231 GMT. The metal had fallen to a one-week low of $1,194.90 on Tuesday, dented by an 11-year high of the dollar and expectations of a US interest rate hike. US gold for April delivery rose $1.70 to $1,206.20 an ounce.

"Gold will eventually break lower but as long as we have no new drivers, there are a lot of support levels below $1,200," ABN Amro analyst Georgette Boele said.

"We have quite an event-heavy end of the week, with the US payrolls data on Friday and the European Central Bank meeting tomorrow (Thursday), so we are unlikely to see much positioning ahead." The dollar hit its highest since September 2003 against a basket of leading currencies, bolstered by strong US government bond yields this week.

A stronger US currency makes dollar-denominated gold more expensive for holders of other currencies, while the rise in returns from US bonds is negative for the metal, which pays no interest. The bullion market was closely following US data to gauge when the Federal Reserve might raise rates. A US Institute for Supply Management services report was due later in the day, ahead of the February nonfarm payrolls report on Friday.