Gold held steady above $1,580 an ounce on Tuesday after rising in the previous session on growing uncertainty on whether a key European Union summit this week will be able to resolve the region's debt crisis.

 

The Thursday-Friday summit will be the 20th time EU leaders have met to try to resolve the spreading crisis which had helped send gold prices to a record above $1,920 an ounce last year as investors turned to the safety of the precious metal.

 

Gold hardly changed at $1,584.10 an ounce by 0546 GMT, within sight of an intraday high around $1,587.90 hit on Monday, when Cyprus announced it was seeking a lifeline for its banks and its budget.

 

"If the U.S. dollar remains strong, then gold may easily move down a little bit. We have to see if people are losing confidence in gold. One thing is for sure, the world's economy is slumping," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.

 

"Sentiment in general is a bit mixed. If you have less money in your pocket, why should you buy gold? The only thing that people are buying for the time being is the U.S. dollar."

 

Inflation fears helped gold stretch its winning run to an 11th year in 2011, but markets are now worried about slowing global economic activity caused by the crisis in Europe, which could force jewellers, investors and speculators to tighten their purses.

 

U.S. gold for August delivery fell $3.70 an ounce to $1,584.70.In other markets, shares fell and the euro held near a two-week low on growing concerns the EU summit would fail to make any significant progress to tackle the debt crisis and further wreak havoc on a slowing global economy.

 

German Chancellor Angela Merkel dashed any lingering hope in financial markets on Monday that Europe would issue common euro zone bonds to help indebted countries, calling such an idea "economically wrong" and "counterproductive."

 

Platinum tracked equities lower, palladium firmed and silver stayed above a near-term low of $26.14 an ounce hit on Dec. 29 last year. The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, was around 57, down from around 58 seen on Friday – it s highest since October 2010. "Silver outperformed the rest of precious metals' complex after the gold to silver ratio rose close to 60 last week, the highest level in almost two years," Deutsche Bank said in a note. "We believe that silver represents attractive value if the gold to silver ratio is around or above 60." The physical gold market noted bargain hunting from consumers, but a further rebound in prices could spur another round of selling. Premiums for gold bars were little changed at between 50 and 80 cents to the spot London prices in Singapore.

 

"We still see light buying, but it's not necessarily coming from a specific area such as Thailand," said a dealer in Singapore. "We expect Indonesia to buy more before Ramadan,"said the dealer, referring the Muslim fasting month that starts in July.

 

Holdings of the largest gold-backed exchange-traded-fund(ETF), New York's SPDR Gold Trust, and that of the largest silver-backed ETF, New York's iShares Silver Trust,remained unchanged on Monday from Friday.