Gold steadied on Thursday as confidence returned to the market following recent volatile trade, linked to a global stock sell-off.
Strong US economic data caused the dollar to strengthen during the afternoon, knocking gold away from earlier highs although analysts expected the precious metal to aim for $700 an ounce as worries about high oil prices, a generally weaker dollar and security risks moved back to the forefront.
Spot gold hit a session high of $677.20 an ounce earlier and was last at $670.20/670.95 by 1603 GMT, little changed from $669.40/670.10 seen late in New York on Wednesday.
"It rebounded as people took another look and thought: safe haven," said David Thurtell, metals analyst at BNP Paribas. Gold hit a nine-month high of $689 on Monday as firm crude oil, tensions between Iran and the United States and a weaker dollar raised the metal's appeal as a haven and a hedge against inflation.
But it was hit, along with other financial markets, by heavy selling triggered by the biggest drop in China's main stock index in a decade. Investors cashed in bullion holdings to pay for losses on equities.
Thurtell said gold was also coming under pressure from the strengthening yen as some investors had bought gold as a hedge when the Japanese currency weakened. Most analysts retain their friendly stance towards gold, with many looking for a move in coming weeks to $700 and above. Gold hit a 26-year high at $730 an ounce last May.
"Sentiment towards gold is still bullish, what happened this week is a blip, it coincided with a period when gold needed a consolidation period," said Stephen Briggs, analyst at SGCIB.
"The gold price is going to head towards $700, that's what people want it to do." John Reade, precious metals analyst at UBS Investment Bank noted in a daily report that spot gold closed at its highest monthly level ever on Wednesday.
In January 1980, when gold traded to its all-time peak of $850, it closed the month at $653 and the previous monthly high close was in September 1980 at $666.75.
"Will this make investors suddenly turn bullish on gold - well no, but once the market settles down...it may be another positive factor that encourages investors to buy gold," he said.
"We remain neutral in the very short term and will wait for returning strong physical demand to trigger a table thumping buy recommendation." Silver was up at $14.17/14.22 an ounce from $14.14/14.19 late in New York. Platinum slipped to $1,244/1,249 an ounce from $1,247/1,254. Palladium ticked up to $351/356 from $350/355 an ounce.