Gold (GC-FT1,152.70-0.30-0.03%) steadied in Europe on Thursday near the near three-month highs it hit in the previous session, as the U.S. dollar rose and as comments from the European Central Bank tempered concerns over Greece's fiscal health.

Spot gold was bid at $1,146.50 (U.S.) an ounce at 1025 GMT, against $1,147.00 late in New York on Wednesday. U.S. gold futures for June delivery on the COMEX division of the New York Mercantile Exchange eased $5.80 to $1,146.50.

Prices have climbed more than 2 per cent so far this week despite strength in the dollar, as persistent fears over the fiscal health of smaller euro zone economies prompted investors to buy the metal as a haven from financial risk.

“There were two things at play – renewed concerns about Greece coincided with physical buying,” said Andrey Kryuchenkov, an analyst at VTB Capital. “Greece concerns are still very strong.”

Nonetheless, he said, soothing comments on Greece from European Central Bank chief Jean-Claude Trichet were now tempering buying interest.

“(Also) the dollar will come back into the picture, and the dollar is looking better than ever,” he added.

The euro fell on Thursday, approaching this year's low against the dollar, on concerns about Greece's precarious fiscal health. Investors are also awaiting a European Central Bank policy decision at 1145 GMT, and accompanying comments.

Buying driven by fears over the euro zone's fiscal issues has so far counteracted what would normally have been a powerful downward force on gold. However, persistent strength in the dollar is likely to weigh on prices in future, analysts said.

Oil Declines

Among other commodities, oil (CL-FT85.60-0.28-0.33%) declined for a second day on Thursday towards $85 a barrel, pressured by a stronger dollar and a rise in U.S. crude stockpiles to their highest level in nearly 10 months.

Meanwhile world shares fell ahead of meetings of the European Central Bank and the Bank of England, and as worries about Greece's financial stability intensified.

On the investment side of the gold market, the world's largest gold exchange-traded fund, New York's SPDR Gold Trust (GLD-N112.850.360.32%) , said its holdings rose 0.914 tonnes on Wednesday to 1,130.737 tonnes, their highest since December.

On the supply side, South Africa, a major producer of the precious metal, said its output fell 9.2 per cent in volume terms in February compared to the same month of the previous year.

Among other precious metals, platinum (PL-FT1,718.50-4.70-0.27%) and palladium (PA-FT506.45-5.90-1.15%) prices retreated after hitting their highest in 20 months and two years respectively in the last session, as investors cashed in gains.

“Initial gains in platinum have been since been reversed as profit taking emerges,” said James Moore, an analyst at TheBullionDesk.com.

“However, we expect both to remain underpinned by increasing investment and industrial demand and look to target $1,750/$525 in the coming sessions.”

Platinum was at $1,698.50 an ounce against $1,700.50, while palladium was at $500 against $506. Silver (SI-FT18.11-0.08-0.46%) was bid at $18.01 an ounce against $18.11.