Spot gold rallied to trade around $1,010 on Thursday as the precious metal continued to look to the dollar for direction, though a sense of caution prevailed due to the threat of heavy liquidation of futures positions.
Spot gold -- which fell in the previous session after the dollar turned higher -- is currently down about 1 percent from the 18-month high of $1,023.85 hit last Thursday.
"The trend of a strong euro and weak dollar is what's keeping the price of gold above $1,000," said Shuji Sugata, a manager at the Mitsubishi Corp Futures & Securities research team.
The euro was around $1.4746, recovering from earlier losses when it fell as low as $1.4685 on trading platform EBS, to trade nearly flat from late US trade.
Sugata added, however, that investors needed to watch the long positions in the New York market.
Noncommercial net long positions in gold futures in New York are at an all-time high, raising concerns that this together with the sharp rally, which has prompted the precious metal to rise as much as 16 percent this year, could lead to a bout of selling.
"Concerns about long liquidation are likely to increase toward the end of the month, and this is something we'll have to keep an eye out for," he said.
Traders in Tokyo returned to the market after a three-day break from Monday to Wednesday due to a series of national holidays.
Gold was at $1,010.05 an ounce at 10:17 p.m. EDT, up 0.3 percent from the notional close in New York of $1,007.05, after earlier rising as high as $1,012.0.
U.S. gold futures for December delivery were at $1,011.7 an ounce, down 0.3 percent.
Sugata said the results of the latest Federal Reserve Open Market Committee (FOMC) meeting held no surprises.
The Federal Reserve on Wednesday kept key U.S. interest rates unchanged, and pledged to keep rates low for an extended period. It also upgraded its assessment of the U.S. economy.
The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said its holdings stood at 1,101.735 tonnes as of September 23, unchanged from the previous business day.
Gold buying by India, one of the world's largest consumers, picked up due to the festival season when people traditionally buy ornaments as gifts for their loved ones.
Japan's Nikkei stock average rose 1.7 percent on Thursday, with exporters rising after Federal Reserve statements that U.S. economic activity was picking up outweighed fears about a stimulus withdrawal by the Fed. .T
