Tokyo gold futures fell more than 2 percent on Wednesday as investors lightened their positions further ahead of the year-end holidays after last week's plunges dampened near-term sentiment.
The market carried over a bearish mood from the previous Tokyo trade after benchmark gold futures on Tokyo Commodity Exchange posted solid strong gains on Monday and again on Tuesday. After plunging to 1,830 yen per gram on Friday, benchmark TOCOM gold rebounded more than 5 percent to as high as 1,933 yen on Tuesday, but heavy profit-taking emerged around the high to hammer it down by the end of Tuesday.
Sentiment for TOCOM gold futures was hurt by falls in dollar-based gold prices in New York the previous day.
"Sentiment is still bearish after last week's plunges," said Takashi Ogura, manager at Kanetsu Asset Management.
"There are plenty of investors willing to sell gold on rallies.
In the near term, the market could test the key contract towards 1,830 yen." December 2006 TOCOM gold was trading at 1,855 yen, down 48 yen or 2.5 percent from Tuesday's close of 1,903 yen. The benchmark contract had plunged 15 percent last week after peaking at an 18-year high of 2,155 yen on December 12, reflecting the yen's strength and as the TOCOM raised margin requirements to check volatility.
"The long-term trend remains bullish, backed by strong fundamentals, but gold will remain weak in the near term after last week's severe losses," Ogura said. Dollar-denominated spot gold fell to its lowest level in four weeks on Wednesday as investors unwound positions before the end of the year. Gold was trading at $490.80/491.60 per ounce compared with $492.90/493.70 late in New York on Tuesday. Gold hit a low of $489.25 on Wednesday it's lowest since November 23.
Other TOCOM precious metals, including platinum futures, fell sharply, tracing falls in gold.