Spot gold was steady after surging to a record in the previous session, and more upside is likely as investors remain nervous about the global economic recovery.   

Spot gold edged down 0.1 percent to $1,268.7 an ounce by 0304 GMT, after having surged more than 2 percent to a record $1,274.75 an ounce in the previous session, its biggest one-day gain in four months.   

'Reaching $1,300 is just a matter of time. The most important factors are zero interest rates and that the world economy outside Asia still seems unstable,' said a Hong Kong-based dealer. 'These are all positive signs for gold.'    
US short-term rates remained steady at low levels on Tuesday, anchored by the Federal Reserve's determination to keep rates down, likely making gold attractive as an investment.

Still, the latest data from the US helped ease fears of a double-dip recession by showing August retail sales posted their largest gain in five months.

The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings rose to 1,298.698 tonnes by Sept 14 from 1,292.619 tonnes by Sept 13. The holdings hit a record at 1,320.436 tonnes on June 29.
   
Technical analysis showed spot gold may form a peak around $1,300 per ounce or rally more explosively over the next four weeks, as per its wave pattern, said Wang Tao, a Reuters market analyst.   

On the currency market, Japan, for the first time in six years, intervened in the market by selling the yen to stem a rise in the currency that is threatening a fragile economic recovery.   

'The market is still on the upside. There's some buying interest from the option-related business. For the physical side, we see some buying interest from China,' said Peter Fung, head of the dealing department of Wing Fung Precious Metals in Hong Kong.

'We are seeing mixed interests at the $1,268 to $1,270 level. There is some bargain-hunting here. From here, the market is looking at the $1,280 to $1,290 level.'    

On the Shanghai Gold Exchange, spot gold hit an intra-day high of 276.17 yuan a gram, just a notch lower than the all time high of 276.99 yuan.

'Worries over inflation are a major factor pushing up gold prices. In addition, there is the seasonal boost in demand from countries including China and India,' said Zhu Yilin, general manager of the research and development department of Jingyi Futures in Shanghai.   

Spot silver rose to $20.52 an ounce, the highest in two and a half years, before easing to $20.43 an ounce.
   
Platinum hit $1,601.5 an ounce, the highest since June 21, before softening to $1,594, up half a percent from the previous close.  - Reuters