Tokyo gold futures rebounded from lows to close unchanged on Tuesday as the dollar-based spot price rallied, reflecting a fall in the dollar against the yen.
The key most-distant April Tokyo Commodity Exchange gold closed unchanged at 2,135 yen a gram from Monday, rebounding about 2 percent from its low for the day. The benchmark contract fell as far as 2,097 yen a gram, the lowest since on Thursday, as the market factored in a fall in Japanese shares.
Other contracts closed unchanged to down 19 yen.
Despite the recovery, many traders were unsure about the outlook for gold, as they remained reluctant about taking large buy positions after last week's sell-off.
"There is still a chance for the market to retest previous lows again as traders are not fully confident about the outlook," said Shoji Sugata, assistant manager at Mitsubishi Corporation Futures and Securities Ltd.
"But any big falls below previous lows are unlikely as many people many still believe the long-term trend is strong." Last on Thursday, the key contract fell to a three-month low of 2,079 yen, which was down about 20 percent from a 20-year high of 2,587 yen reached on May 12.
Key TOCOM gold continued to face tough resistance around its seven-day moving average (MA) of 2,163 yen, while technical support was seen at its 200-day MA of 2,040 yen. TOCOM gold closely tracked movements in dollar-based spot gold, which jumped from lows.
Spot gold rebounded from lows as the dollar lost ground on the yen reflecting comments from Bank of Japan Governor Toshihiko Fukui, who signalled that interest rates in Japan are on track to rise, possibly as soon as July. The dollar fell below 115 yen by late Asian trade after reaching a session high of around 115.60 yen.
A weaker dollar tends to lift gold, which is generally priced in dollars globally, because it becomes cheaper in key overseas trading areas like Europe and Asia.
The yen's rise against the dollar usually weighs on yen-based TOCOM gold futures prices, but the market was focusing closely on an overall rise in the dollar-based price. Gold was trading at to $570.45/571.45 an ounce after dipping as low as $560.50 in Asian trading.
It was at $568.80/569.50 late in New York on Monday. Gold has lost around 23 percent in value since spiking to a 26-year high at $730 on May 12, and dealers said the metal's steady falls since touching that level had forced many players to readjust their positions. Gold rose to Multi-year highs last month as fund managers poured money into the metal on worries about rising energy costs and tension in the Middle East.