London: Gold prices recovered early losses in Europe yesterday to trade little changed from the previous session as investors bought the precious metal to hedge against volatility in the foreign exchange markets.

Spot gold was bid at $1,111.45 (Dh4,081) an ounce at 1219 GMT against $1,111.40 late in New York on Thursday, well off an earlier low of $1,098.55.

The metal slipped 1 per cent in Asia but met buying interest in early European trade amid fears over instability in the currency markets. The euro is suffering from dollar strength and concern over the fiscal health of smaller euro zone economies.

"Gold is benefiting firstly from its value as a defensive investment, and secondly from the marked improvement in the technical picture, which emerged at the start of the week," said Mitsubishi precious metals strategist Tom Kendall.

US gold futures for April delivery on the Comex division of the New York Mercantile Exchange eased $8.80 to $1,109.02 an ounce.

Gold's usual relationship with the US dollar — strength in which normally pressures the precious metal — has weakened as fears over the outlook for paper currencies in general lifted interest in bullion as an alternative asset.

Monetary policies

"This development...is near-term gold-bearish, as it reduces liquidity," said HSBC analyst Jim Steel in a note. "Highly accommodative monetary policies have been an important element in the gold rally."

He noted, however, the Fed's assertion that the change was not expected to lead to tighter financial conditions or lead to a change in the outlook for monetary policy.