Gold traded in a narrow range and hovered around $1,575 an ounce on Wednesday
Gold traded in a narrow range and hovered around $1,575 an ounce on Wednesday, evoking little interest from investors who switched to riskier assets as confidence in the global economy grew.
A strong stock market grabbed the attention of investors, with the Dow Jones industrial average hitting a record high on data showing quickened growth in the huge US services sector.
In contrast, the exodus of investment from gold-backed exchange-traded funds underscored the sober sentiment for the precious metal and overshadowed physical purchases of the metal in Asia.
"It is really a tug of war between ETF selling and physical buying right now," said Yuichi Ikemizu, head of commodity trading, Japan, at Standard Bank.
"We have seen quite good physical demand from China and Southeast Asia, but the ETF selling has put a lid on gold prices."
SPDR Gold Trust, the world's biggest gold ETF, said its holdings dropped on Tuesday in the eleventh session of straight decline to a 16-month low of 1,244.855 tonnes. The total value of the fund has dropped $9 billion so far this year.
Spot gold edged up 0.2 percent to $1,578.81 an ounce by 0251 GMT, drifting within a $1,564-$1,587 range that it established recently.
US gold was also up 0.2 percent at $1,578.10.
Gold contracts on the Shanghai Gold Exchange traded at about $20 an ounce premium to spot prices, encouraging Chinese buyers to make purchases in the global market and bring the metal onshore.
Spot gold has fallen nearly 6 percent so far this year and is down about 18 percent from a record high of $1,920.30 an ounce hit in September 2011.
Supporting the sentiment in gold, South Korea's central bank said on Wednesday it bought 20 tonnes of gold in February in the fifth purchase of the metal in less than two years, taking total holdings to 104.4 tonnes.
But more and more major investment banks are breaking away from the consensus for continued gains in gold prices as an incipient return to growth of the global economy has undermined the argument for holding the precious metal.
Workers went on a wildcat strike on Tuesday at Lonmin's Marikana platinum mine in South Africa. Thirty-four miners were killed at the mine last year during a violent clash between miners and police.
Spot platinum hit a one-week high of $1,608 on the news in the previous session before coming off. It rose 0.7 percent to $1,597.49 on Wednesday.