Gold dips but off 1-month lows as Thai buyers emerge

“It isn't clear whether this is a dead cat bounce or fresh buying signals. If $903 holds, sharp gains are possible in the coming sessions and we could even see levels beyond $970,” said Pradeep Unni, analyst at Vision Commodities in Dubai.

But in Thailand, one of Southeast Asia's main consumers, the physical market was abuzz with activity as investors took advantage of the price falls, hoping for better returns in the future with domestic interest rates seen falling soon.

“There have been so many buyers in the past couple of days. I never saw something like this before,” Jiti Tangsitpakdi, head of Thai Gold Traders Association, told Business Radio.

“Our production can't catch up with the demand. Prices have come down a bit today and we already see buyers queuing up before the shops opened,” said Jiti, referring to more than 100 gold shops around Bangkok's Chinatown and gold-trading centre.

Precious metals, oil, grains and agricultural products have tumbled this week in a wave of selling as funds cashed out, taking profits at record high prices.

But dealers said the long-term outlook for gold remained bright because of strong investor interest in the metal used as a hedge against inflation and expectations of more interest rate cuts in the United States in April.

“Gold and other metals could fall further as the market has surged too rapidly. But falls in gold could be limited around $850 where demand for physical gold could start growing,” said Hisaaki Tasaka, market analyst at Ace Koeki in Tokyo.

The dollar was steady against the euro in holiday-thinned trade on Friday, holding gains made the previous day when investors sold commodities such as oil and gold and bought back the US currency.

“The situation is quite unchanged. As for gold, ETF buying is very strong and it is a good support,” said Yukuji Sonoda, precious metals analyst at Daiichi Commodities in Tokyo.

Gold held by New York-listed StreetTRACKS Gold Shares. the world's largest gold-backed ETF, hit a record high of 663.83 metric tons this week.

Spot platinum fell to $1,850/1,860 an ounce from $1,855/1,875 an ounce. It struck a record at $2,290 an ounce on March 4 on fund buying after a power crisis disrupted mining in main producer South Africa and supply worries were expected to underpin the market.

“Supply in South Africa is not so good and demand from the automobile sector is strong,” said Sonoda, referring to fundamentals in platinum.

The global platinum market is likely to witness a huge deficit this year and in 2009 as power crisis in top producer South Africa hits output, while industrial demand remains strong, a Reuters survey showed. (Reuters)