Gold fell nearly 2% on Monday after rising briefly to a 5-week high above $800, with dealers locking in profits after a two-day rally, but some analysts said another round of safe-haven buying could be nigh.
Gold posted its biggest daily percentage gain in two months on Friday as investors rushed to buy the metal on economic uncertainties after shares of Citigroup tumbled for a fifth straight day. Sunday's $300 billion bailout for the No. 2 US bank failed to completely dispel their anxiety.
“The Citi news is another indication that we are not out of the woods yet and more surprises could be on the way,” said analyst Pradeep Unni at Richcomm Global Services.
“The credit crisis and its ancillary news is likely to please gold bulls, but sustainability would be a key issue.”
Gold fell $13.05 an ounce to $786.40 from Friday, when it surged more than 7%. Prices hit a high of $805.85 on Monday on a firm euro currency and oil, but buying later subsided and trade was muted by a national holiday in Japan.
With financial markets in chaos, the United States, China, Japan and 18 other economies in Asia and the Americas promised at an APEC summit in Peru to “take all necessary economic and financial measures to resolve this crisis.”
The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust GLD, said holdings rose by 3.06 tons to 755.06 tons as of November 21.
Speculative gold players in the non-commercial category boosted their net long positions to 64,829 on gold futures traded on COMEX at November 18, from 63,959 long lots at November 11, Commodity Futures Trading Commission data showed on Friday.
“There was a lot of disinvestment from gold, and I think when the opportunity arrives, we might see investors diversify back into gold,” said David Moore, commodities analyst at Commonwealth Bank of Australia in Sydney. “I think it's quite possible that gold will continue to firm.”
Technically, gold still faces some resistance at the 100-day and 200-day averages around $830 and $873 an ounce, said dealers.
Gold has rebounded from its 13-month low of $680.80 in October, when a sell-off in equities forced investors to sell bullion to cover losses. Although it remains 23% below a record high of $1,030.80 hit in March, it has held up much better than other commodities that are not at half their peaks.
The euro edged up to $1.2654 as the market digested Citigroup's rescue plan.
Oil gained more than 2% to around $51 a barrel on hopes that OPEC might cut output again as early as this week, which in theory boosted gold's appeal as a hedge against inflation.
Platinum traded at $817.00 an ounce, up $5.50 from New York's notional close, to track early gains in gold. (Reuters)