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Gold down over 2% on Chinese, Australian selling

  Gold fell more than 2% on Monday after rallying to a near four-month high around $930 an ounce last week, led by selling from speculators in China and bankers in Australia, dealers said.

Gold rose 5.6% in January, its third consecutive monthly rise, partly driven by flight-to-quality buying after funds poured more money into bullion as an investment instead of other asset classes such as stocks and treasuries.

Gold was trading at $908.45 an ounce, down $18.55 from New York’s notional close. Bullion rallied more than 2% to hit a high of $930.40 on Friday -- its strongest since October 10, when it hit $931, its highest in more than two months.

“It’s profit taking and we also heard the Chinese are also behind the fall,” said a dealer in Singapore. A Tokyo-based physical dealer said: “There’s selling by Australian bankers. People also thought the drop in price was caused by the Chinese.”

But dealers said sentiment remained positive after the recent rally spurred interest from hedge and commodity funds as well as retail investors amid turmoil in the financial sector. Facing opposition from Republican lawmakers to parts of his economic recovery plan, President Barack Obama called Congressional leaders to a meeting on Monday to drive home his message of urgency.

“I am bullish but I am waiting for prices to move above $930 to turn more bullish. That seems like the key level to look at,” said Adrian Koh, an analyst at Phillip Futures in Singapore, referring to the recent highs.

The world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, said it held a record 843.59 tons of gold on January 29, up 10.71 tons from January 27, as gold’s recent rally attracted buying from funds and investors.

Speculative gold players in the non-commercial category boosted their net long positions to 141,114 lots on gold futures traded on COMEX at Jan 27, up from 123,937 net long lots at January 20, Commodity Futures Trading Commission data showed.

But the physical sector remained slow, with jewelers staying on the sidelines because of high prices. India’s gold futures hit an all-time high on Friday, tracking strong global markets and support from a weak rupee. India is the world’s largest gold consumer and the jewelry sector accounts for almost 70% of global bullion demand.

“From the physicals’ perspective, prices are getting more expensive, so buyers will be more inclined to hold back first. Jewelry buying is lower on higher prices from places like India and perhaps also due to the effects of the global economic crisis,” said Koh of Phillip Futures. “But when we take a look at the investment demand for gold, it still looks firm,” he said. (Reuters)