- European stocks extend recovery
- U.S. dollar down around 0.2%
March 28 (Reuters) - Gold prices steadied on Tuesday, recouping earlier losses on a softer dollar, while investors favoured higher-risk assets as banking worries eased and pushed bullion further away from the $2000 mark it reached last week.
Having ended lower in the last two sessions, spot gold was largely unchanged at $1,956.50 per ounce by 1158 GMT. U.S. gold futures were up 0.2% to $1,958.30.
The dollar edged 0.3% lower, making gold more attractive to holders of other currencies.
In the near-term, gold prices could slip to $1,933, but the outlook for gold remains bullish with fast approaching peak in U.S. rates and a danger of hitting a recession in coming months, said Ole Hansen, head of commodity strategy at Saxo Bank.
European stocks rose for a second session after a buyout deal for Silicon Valley Bank calmed markets and rekindled interest in risky assets, reducing demand for safe-haven gold.
"Near-term the focus remains on the financial market turmoil and how U.S. economic data evolves, which influences the monetary policy of the Fed," UBS analyst Giovanni Staunovo said.
Markets are expecting a 48.7% chance of the Federal Reserve maintaining rates at the current range in May, according to the CME FedWatch tool. Last week, the Fed indicated it was on the verge of pausing further rate hikes.
Gold has been closely tracking the changing expectations regarding Fed policy, economists at Barclays wrote in a note.
"If inflation drops sharply but central banks are reluctant to immediately lower rates in response to it, this could be detrimental" to gold, they wrote.
Higher interest rates tend to discourage investment in non-yielding bullion.
In other metals, silver was down 0.3% to $23.02 per ounce, platinum was off 0.2% to $970.23 while palladium gained 0.6% to $1,416.45.
Reporting by Ashitha Shivaprasad and Seher Dareen in Bengaluru; editing by Jane Merriman and Jason Neely