Gold prices rose towards $1,230 an ounce in Europe on Thursday, close to the previous session's near seven-week high, as concerns over the outlook for economic growth supported the precious metal.

Spot gold was bid at $1,229.90 an ounce at 0801 GMT, against $1,227.55 late in New York on Wednesday. US gold futures for December delivery rose 50 cents to $1,231.90.   

The precious metal rose as high as $1,232.35 an ounce on Wednesday, its strongest since July 1. Gold has risen more than 1 percent so far this week, but physical buying remains relatively buoyant despite high prices, traders said.   

Afshin Nabavi, head of trading at MKS Finance, said he expects physical demand from India ahead of the festival season there to support prices in the near future. "Physical demand was still around yesterday despite the higher prices," he noted.

"Ahead of the initial jobless claim and any other surprises, I would think (we will see) a trading range of $1,228-1,235 for the time being," he added. The markets are awaiting a raft of US data later in the session, including weekly jobless numbers at 1230 GMT and the Philadelphia Fed business activity index for August at 1400 GMT, for more clues on the outlook for the world's largest economy.   

Fresh signs of weakness could hurt assets more exposed to the economic cycle, like equities and industrial commodities, and lift so-called safer investments like gold, analysts said.   

Better appetite for bullion from investors was reflected in a rise in holdings of the world's largest gold exchange-traded fund, meanwhile.

New York's SPDR Gold Trust said its holdings rose just under 1 tonne to 1,295.516 tonnes, their highest since July 27, on Wednesday. ETF Securities, which said in a weekly report on Thursday that inflows into its physically backed gold products had hit a 13-week high, attributed gold ETF buying to economic concerns.   

"The renewed interest in gold in particular indicates investors are again turning defensive about the economic outlook," it said. "Softer economic data continues to impact confidence about the sustainability of the global recovery, fuelling inflows into the precious metals sector."         

The technical outlook for gold is also looking more positive after the metal's recent gains, analysts said, though strong pockets of resistance remain.

"Having broken through daily cloud resistance earlier in the week, a retracement level at $1,242 could be tough to break in the near term," said Barclays Capital in a note.

"Nevertheless, consolidation above $1,190 is bullish, and we continue to expect the cited resistance eventually to give way and gold to test $1,350 later in the year."  

Elsewhere the dollar firmed more than 0.5 percent against the euro. European shares turned flat after opening higher, while oil came under pressure from a stronger dollar and brimming US petroleum inventories.   

Meanwhile, Bunds edged lower as equities looked slightly stronger, although fears over the health of the global economy were seen continuing to dominate sentiment, supporting demand for core government debt.

Among other precious metals, silver was bid at $18.40 an ounce against $18.32, while platinum was at $1,531.50 an ounce against $1,527 and palladium was at $485.75 against $486.50. - - Reuters