By Clara Denina
LONDON (Reuters) - Gold steadied on Wednesday as the dollar weakened and investors pushed back expectations of when the Federal Reserve will start raising interest rates, but strong European shares curbed gains.
Spot gold rose 0.1 percent to $1,193.40 an ounce by 0959 GMT, within reach of Tuesday's one-week high of $1,196.60.
The metal gained around one percent in the previous session, benefiting from the softer dollar and volatility in global bond markets. But it has remained in a narrow $20 range below $1,200 so far this month.
"Price volatility is remarkably low and gold is moving into a narrow trading range and although people are priming themselves for a breakout, there are no strong drivers and the dollar trading sideways is of no help," broker Sharps Pixley's chief Ross Norman said.
German and U.S. 10-year bond yields, which climbed on Tuesday, retreated, decreasing the opportunity cost of holding gold, a non-interest bearing asset.
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"The question facing gold is will bullion derive more upwards thrust from a weaker dollar or will rising yields sap and possibly reverse the rally?" HSBC said in a note.
"It appears that the currency markets are more influential in aiding bullion, at least near term, although gold is running
into resistance at the $1,200 an ounce psychological level."
The dollar fell 0.2 percent against a basket of leading currencies, ahead of U.S. jobs data that will be closely watched to gauge the strength of the economy and how that would impact the Fed's interest rate policy.
U.S. retail sales are expected to have risen a mere 0.2 percent in April, slowing from 0.9 percent in March.
A further weakening of the dollar or global equities following the data could boost safe-haven demand for gold, traders said.
For now, gold's upside potential was capped by stronger European shares, indicating increased investor appetite for risk.
Fed officials provided no clarity on Tuesday on when the U.S. central bank would raise interest rates.
A top Fed official said he did not know when interest rates will rise, but tempered that uncertainty by applauding an apparent consensus between markets and the U.S. central bank that it will happen later this year.
Interest rates at rock-bottom levels have benefited gold since the 2008-2009 financial crisis.
Silver rose 0.5 percent to $16.64 an ounce. Platinum dropped 0.3 percent to $1,128.40 an ounce, while palladium was up 0.1 percent at $783.50 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore; Editing by David Evans)