Volatile gold fell 3.5 percent to its lowest in nearly four weeks on Monday as a stronger dollar prompted selling, but pared losses when bargain-hunters jumped in.
Other metals moved sharply, with silver slipping four percent to a one-month low before rebounding.
"Although we have seen some reassuring signs of physical demand and some gold ETF buying, on balance we remain cautious and suspect further near-term weakness may be seen," said John Reade, precious metals analyst at UBS Investment Bank, referring to exchange-traded funds (ETFs).
"We do expect a bounce at some point ... investors appear to be waiting for metal prices to stabilise before re-entering the market on the long side."
Gold reached a high of $661.25 an ounce before falling as low as $636.20 as selling accelerated. Spot gold was at $651.50/653.00 by 1425 GMT, against $659.20/660.00 in New York.
The dollar gained ground, boosted by volatility in global equity and commodity markets as investors switched from riskier assets into cash.
A firm dollar makes dollar-priced gold more expensive for holders of other currencies.
The dollar built on gains made late last week when investors shifted money into US assets, and dealers said the currency was ready for a correction after its rapid fall over the past couple of weeks.
"It's going to be extremely volatile. There is greater risk-aversion now and that means people are more hesitant," Stephen Briggs, economist at SG Corporate and Investment Banking, said.
"But this has now become a big enough correction for people to sit up and take notice," he said, adding that the long-term bull trend remained intact as investors thought the dollar would fall in future.
In other markets, oil fell below $68 a barrel to a six-week low, while copper came under pressure as investors continued to pull money out of commodities.
In industry news, private Saudi Al Othaim Jewellery Factory Group said it had bought 36 tonnes of raw gold from an African central bank for $480 million.
Gold added $100 in one month to hit a 26-year high of $730 on May 12, but eroded almost all those gains in the following 10 days. At its peak this month, the metal was up 74 percent from a year earlier.
"Despite some speculating the bull run for gold is over, in my view there are still far too many factors in favour of being long in gold, with $850 remaining a realistic target for later in the year as investment demand continues to swell prices," James Moore of TheBulliondesk.com said in a note.
Mining stocks were hit, with Newcrest Mining Ltd, Australia's top gold miner, shedding 10 percent, gold and copper miner Oxiana Ltd losing 11.4 percent. Zijin Mining Group Co Ltd dropped about 14 percent.
South African stocks fell more than 2 percent, while the gold mining index was down 3.15 percent. "We continue to view the current combination of rising inflationary threat in the US, uncertainty over the US dollar and geopolitical tensions as providing a supportive environment for gold," Barclays Capital said.
Platinum rose to a high for the day of $1,298 an ounce but then dropped to a one-week low of $1,270 and was later quoted at $1,282/1,286.
Palladium was at $336/342 an ounce, against $338/343. It hit a low of $330 on Friday - its lowest since April 5. Silver fell as low as $11.90 an ounce, its weakest since April 24, before rebounding to $12.47/12.57, versus $12.38/12.48 in the US market.
Comments
Comments are closed.