[BENGALURU] Gold edged up after touching a fresh two-week low early on Thursday on cautious optimism that British voters would opt to stay in the European Union.
A vote to leave the 28-member bloc could tip Europe back into recession, putting more pressure on the global economy and increasing the appeal of bullion as a counter-cyclical asset.
Polling will take place between 0600-2100 GMT on Thursday, with the results expected early on Friday.
Spot gold was up 0.3 per cent at US$1,269.60 an ounce by 0644 GMT. Bullion touched a low of US$1,260.36 earlier in the session, its worst since June 9.
US gold was up 0.2 per cent at US$1,272.
"In the near term, gold appears heavily focused on the United Kingdom referendum vote and will likely move according to the results," HSBC analyst James Steel said in a note.
"Once the effects of the referendum results pass, we would expect that gold will eventually focus back on other price drivers and fundamentals. There is a good argument that in the near term gold may be overbought." The poll verdict aside, the medium- to long-term view for the yellow metal, which has risen about 20 per cent this year, is still bullish and US$1,250 to US$1,315 an ounce is likely to be the range in the immediate future, said Mark To, head of research at Hong Kong's Wing Fung Financial Group.
"I believe the major factor affecting gold (in the long term) is not a single risk event like Brexit," he added.
William Wong, assistant head of dealing for Wing Fung's precious metals desk, said gold prices could drop down to US$1,230 an ounce if Britain chooses to continue being a part of the European Union.
Ahead of the UK vote, gold investors sought to protect themselves by increasing their options positions on Wednesday. Implied volatility, a measure of options activity, in Comex July gold calls and puts with strike prices that are as much as US$50 higher or lower than current prices soared to record highs on Wednesday.
The sterling rose and Asian stocks crept higher in cautious trade on Thursday though many investors sought shelter in safe-haven assets such as the yen and government debt.
Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.39 per cent to 915.90 tonnes on Wednesday, the highest since September 2013.
Among other precious metals, silver inched 0.5 per cent higher to US$17.33 and platinum rose 0.3 per cent to US$973.60. Palladium fell 0.4 per cent to US$557.51 an ounce.