London: Gold eased on Wednesday from the previous day’s 6-week peak as the dollar rose to a one-week high against a basket of currencies, with signs of softening physical demand also pressuring the metal.

Prices were supported however by worries over the outlook for the global economy, heightened this week after China said third-quarter growth was the slowest since 2009. That has lifted appetite for counter-cyclical assets such as gold.

Spot gold was down 0.3 per cent at $1,245.60 an ounce at 0956 GMT, while U.S. gold futures for December delivery were down $5.50 an ounce at $1,246.20. On Tuesday gold rose to its highest since Sept. 10 at $1,255.20 an ounce.

“Any period of dollar strength is going to weigh on gold,” Mitsui Precious Metals analyst David Jollie said. “(But) we’ve moved from people having a very bearish sentiment to a more mixed sentiment, and a more bullish outlook.” “We’re getting hints that people are concerned about deflation, hints that the Federal Reserve may delay interest rates rises,” he said. “We haven’t yet necessarily changed to a position where people are expecting a 10 per cent, 20 per cent rally. Until we get that, we may not see the full strength of general investor flows.” The dollar further pared this month’s losses on Wednesday as the euro fell below $1.27 for the first time in a week, on a newswire report that at least 11 banks are set to fail the European Central Bank’s stress tests, results of which are due on Sunday.

European shares edged up, meanwhile, on upbeat company earnings results and hopes of corporate bond buying by the European Central Bank.

While gold in the short term is hostage to moves in the wider markets, its resilience at the $1,180 level, which it bounced off for a third time earlier this month, is reviving investors’ interest in the metal, analysts said.

GOLD BUYING EASES IN CHINA Gold buying in number one consumer China has weakened after prices rose, dealers said, while Indian demand is also likely to be lower following the festival of Diwali this week.

“The Chinese were sellers today, which was of no real surprise, but did not chase the market lower,” precious metals house MKS said in a note. “The premium today on the Shanghai Gold Exchange was a little lower, which was reflective of the broad-based selling, sitting between $1-$2 over spot.” China and India dominate the world physical gold market, accounting for more than half of global fabrication demand for the metal between them.

Among other precious metals, spot platinum was down 0.6 per cent at $1,266 an ounce, while spot palladium was down 0.5 per cent at $768.20 an ounce. Silver was down 0.8 per cent at $17.36 an ounce.

Official customs data showed China’s platinum imports fell 18.5 per cent in September to 8,615kg, and were down by a similar percentage in the year to date.

China’s silver imports were little changed in September at 243,071kg, the data showed, while its palladium imports were up 5 per cent at 2,050kg last month and 28 per cent year to date.