LONDON, July 16: Gold edged lower on Wednesday as the dollar steadied off the previous session’s lows, denting the precious metal’s appeal as a currency hedge, and as oil prices softened.

However, the precious metal remains well supported by safe-haven buying amid fears over the health of the US financial system.

Gold fell to $972.40/973.40 an ounce from $975.90/977.90 an ounce late in New York.

But a recovery in the U.S. currency early on Wednesday has reduced buying of the precious metal as an alternative to the dollar and is helping to keep a lid on fresh gains.

The dollar steadied around a cent above Tuesday’s record low against the euro on Wednesday, as investors welcomed new measures to stabilise US financial stocks and a dip in oil prices.

Oil extended losses after it dropped sharply on Tuesday, when hedge fund selling knocked New York crude down over $9 a barrel to a session low of $135.92.

Gold tends to move in line with oil, as the precious metal is often bought as a hedge against oil-led inflation. Strength in crude can also boost interest in commodities as a whole.

The market is now turning to the second day of Federal Reserve Chairman Ben Bernanke’s testimony on the outlook for the US economy, although analysts say its effect is likely to be limited compared to Tuesday’s session.

The second day of the semi-annual Bernanke testimony, this time to the House Financial Services Committee, is likely to have less impact on gold, said Dresdner Kleinwort consultant Peter Fertig.

Among other precious metals, spot silver tracked gold higher to $18.84/18.89 an ounce from $18.86/18.93 late in New York.

Platinum dipped to a two-month low, however, as the gloomy outlook for the global economy deepened fears over demand from carmakers for autocatalysts, of which the white metal is a major component.

Concerns over demand from autocatalysts (are pulling) down prices following news from Toyota that it will cut this year’s global sales target by 350,000 vehicles to 9.5 million, said Fairfax analyst Marc Elliott in a note.

—Reuters