Gold fell more than two percent on Friday as a rise in the dollar after US jobs data and chart signals prompted investors to take profits from recent highs, dealers said. Gold fell to $643.10 and was at $644.90/645.65 an ounce by 1626 GMT, against a six-month high of $661.50 on Thursday, when it closed at $657.00/657.40 in New York.
"Any market that is one-directional often comes to an end. We just needed to correct from the move up and now the market is sustainable at these levels," said Peter Hillyard, head of metals sales at ANZ Investment Bank.
"If the market stays above $642, then I think we will move higher over the course of the next few weeks back to $670. There are buying opportunities on the dips," he said, adding gold fell on technical selling and that a stronger dollar contributed to the fall. The dollar rose in a technical rebound after an initial drop following a report showing softer-than-expected January US payrolls growth.
Gold often moves in the opposite direction to the dollar and generally rises during geopolitical conflicts.
News that the United States had no plans to go to war with Iran also intensified selling, dealers said. Defence Secretary Robert Gates said the United States was not planning for a war with Iran and instead is trying to stop them from contributing to the violence in Iraq.
Market sentiment was also down because of a sharp drop in base metals prices on a report of heavy losses at a hedge fund. Despite the decline, traders remained convinced the market would move higher. "Longer term, I am still fairly friendly towards the market. I think there is a chance it could move higher," said a metals dealer, adding increased buying by investment funds and physical purchases ahead of the Chinese New Year might support gold.
The Lunar New Year begins in mid-February. In the physical market, sales of scrap picked up In Asia, putting pressure on premiums for gold bars in Singapore. Premiums dropped to 30 US cents an ounce to the spot London price in Singapore from 50 cents two weeks ago.
Scrap supply in Turkey rose this year. The market also saw imports jumping 44 percent to 17.2 tonnes in January from a year earlier. In other metals, silver was at $13.30/13.35 an ounce, against $13.62/13.69 in New York on Thursday, when it rose to $13.75 - its highest since mid-December. Platinum fell to $1,157/1,162 from $1,182/1,187 an ounce and Thursday's two-month high of $1,189. Palladium declined $3 to $338/343.
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