PRECIOUS-Gold steadies as firmer dollar offsets Russia concerns
* Surge in gold loses steam as dollar firms, equities steady
* Tensions between Russia and the West run high
* Chinese buying interest softens above $1,300/oz (Updates prices, adds comment)
By Jan Harvey
LONDON, Aug 7 (Reuters) - Gold prices stabilised on Thursday after rising more than 1 percent the previous day, as a firmer dollar and a steadier tone to stock markets offset concerns that tensions between Russia and the West over Ukraine could escalate.
A build-up of Russian troops on the border with Ukraine and tit-for-tat economic sanctions between the West and Moscow on Wednesday drove investors out of assets seen as higher risk including stocks and into the relative safety of bonds and gold.
European shares, which had fallen sharply, steadied on Thursday, however, while the dollar index rose 0.2 percent. Gold, which is priced in dollars, tends to lose ground when the U.S. unit firms.
Spot gold was at $1,304.90 an ounce at 1407 GMT, down 0.1 percent, while U.S. gold futures for December delivery were down $2.30 an ounce at $1,305.90.
The metal has held within a narrow $30 range so far this month as speculation that U.S. interest rates were set to rise, increasing the opportunity cost of holding gold, was offset by concerns over violence in Ukraine and the Middle East.
"Since mid-June there has been a lot of macro influence. Some weeks we've had better U.S. data, which has made people think of higher interest rates, so gold falls," Citi analyst David Wilson said. "Then we have geopolitical risks, which provide some support. It's the tension between those two things that is keeping gold in a range."
The crisis in Ukraine represents a risk to the euro zone economy, although the likely impact of European sanctions on Russia and retaliatory measures is uncertain, European Central Bank President Mario Draghi said on Thursday.
"Our risks to the recovery were on the downside to begin with, and certainly one of these risks would be the geopolitical developments," Draghi said at a news conference after the ECB left interest rates unchanged at record lows.
BUYING SLOWS IN CHINA
In the physical markets, buying slowed on Thursday after prices rose above $1,300 an ounce. Premiums in top buyer China dropped to about $1 an ounce from $2-$3 in the previous session.
Demand had already been sluggish due to the seasonally quiet summer period and on expectations of a further drop in prices.
Investor sentiment in bullion still seemed fragile on persistent worries over possible tightening of monetary policy in the United States.
Holdings in the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Trust, fell 2.4 tonnes to 797.65 tonnes on Wednesday.
Among other precious metals, silver was down 0.4 percent at $19.95 an ounce. The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, edged off the eight-week high it hit on Wednesday as silver clawed back some lost ground against gold.