Gold continued a rollercoaster ride on Monday to trade in a broad range below its 25-year peak and silver took a beating, falling more than seven percent. Some investors booked profits from highs and price dips attracted new buyers, but overall sentiment remained upbeat, traders said.
Gold traded in a range of $20 an ounce, compared with an average $27 in the previous three sessions, but much higher than about $10 in the past weeks.
Silver was the worst hit among precious metals, with prices slipping more than seven percent before recovering marginally.
"The market has just become more volatile because the funds are getting in and getting out. It's very difficult to control the market but it's not collapsing," said Peter Hillyard, head of metals sales at ANZ Investment Bank.
"The swings are going to be more significant but the overall direction hasn't changed. It's higher," he added.
Gold raced as high as $639.00 from $632.00/632.80 in New York late on Friday before dropping to an intraday low of $618.70. It was at $623.70/624.60 by 1507 GMT, against a 25-year peak of $645.75 on Thursday.
A weak dollar first pulled more money into gold before easing oil prices took some of the worry out of inflation concerns, prompting a wave of bullion sales, dealers said.
Oil fell sharply after Opec promised to keep pumping near maximum capacity.
A range of investment and private funds - increasingly seeing gold as a hedge against the depreciation of the dollar - have pushed the metal price up as much as 25 percent this year.
Analysts said the dollar was under pressure after finance ministers of the world's biggest economies called for major exporting nations to allow their currencies to rise against the dollar to help resolve global imbalances, highlighted by the massive US trade deficit and China's booming surplus.
The dollar hovered near seven-month lows against the euro and three-month lows against the yen on Monday after the Group of Seven said China should let the yuan appreciate as a way of fixing global imbalances.
"Gold is still very well supported, with fund interest appearing on any price dips," a precious metals analyst in London said.
"Further gains cannot be ruled out, given the way the market has been trading."
"Gold should continue to find good support given the limited change in the macroeconomic and geopolitical picture, particularly with the UN Security Council's deadline on Iran approaching at the end of the week," James Moore, analyst at TheBullionDesk.com, said.
Merrill Lynch analyst Michael Jalonen said in a client note that in the short term the gold market should "gain confidence by virtue of holding above the $600-an-ounce level".
Physical buying in India, the world's largest gold consumer, picked up despite high prices as jewellers prepared for a local festival on Sunday. Weddings until the end of May and new investors have also lifted demand, Indian dealers said.
Silver fell to $12.01 before marginally rising to $12.24/$12.34, against $12.93/13.03 in the US market.
Silver prices have soared as much as 50 percent this year, hitting $14.68 last Thursday on expectations an exchange-traded fund under review will boost demand.
Platinum fell as low as $1,100 an ounce before recovering to $1,118/1,123, against $1,125/1,130 in New York. Palladium was down $2 at $353/358.
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