SINGAPORE, Mar 1 Gold rose more than 1 percent on Thursday on the back of bargain hunting
SINGAPORE, Mar 1 (Reuters) Gold rose more than 1 percent on Thursday on the back of bargain hunting, raising hopes it was still on track to test $700 an ounce, albeit at a slower pace.
Spot gold hit an intraday high of $677.20 an ounce before slipping to $670.90/671.60 by 0726 GMT, still higher than $669.40/670.10 late in New York on Wednesday, when it dropped to a one-week low of $660 before bargain hunters came to the rescue.
A big sell-off in U.S. stock markets had triggered selling in gold as investors cashed out bullion holdings to cover margin calls in other markets.
''The upside target is still $700. There's no change but of course we should hold above $640,'' said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
''Sentiment is still bullish but there are too many long positions in the market,'' said Leung, referring to a build-up in long positions in New York's COMEX futures.
Gold hit a 9-month of $689 on Monday as firm crude oil tensions between Iran and the United States and a weaker U.S. dollar raised the metal's appeal as an alternative investment and a hedge against inflation.
The metal rallied to a 26-year high of $730 in May 2006 but gold's recent drop slightly affected sentiment among some investors.
''Whilst the fundamentals would still suggest gold could hit $700 an ounce, it is likely that some investors will now be having second thoughts which may slow the recovery,'' said Investec Australia in a report.
Tokyo gold futures dropped by more than 1 percent as the fragility in global equities prices led by falls in Chinese stocks ignited active liquidation.
''The market turned cautious, thinking that share prices could fall again overseas and pressure gold as Shanghai stocks started falling more clearly,'' said Shuji Sugata, assistant manager at Mitsubishi Corp. Futures and Securities Ltd.
''The technical trend has deteriorated quite significantly after yesterday's drop and now the market will be very careful about taking new positions from here,'' Sugata said.
The benchmark gold contract for February 2008 on the Tokyo Commodity Exchange hit a one-week low of 2,577 yen per gram before ending at 2,582 yen ($21.81), down 38 yen from Wednesday's close.
The dollar held near a 10-week low against the yen as investors cut short positions in the Japanese currency after stock market declines across Asia made them worry about a further slide in risky assets.
The dollar and other major currencies gave up initial gains following comments by Federal Reserve Chairman Ben Bernanke on Wednesday that it is ''reasonable'' to expect stronger growth later in the year, which helped ease some investor fears.
The dollar slipped to 118.25 yen, pulling back from a high of 118.87 hit in early trade. The euro fell slightly to $1.3220 -- off the two-month high of $1.3260 hit on Tuesday.
Dealers awaited key U.S. indicators on Thursday, including the Institute for Supply Management's February manufacturing survey.
Silver eased to $14.13/14.18 an ounce from $14.14/14.19 late in New York.
Platinum fell to $1,236/1,241 an ounce from $1,247/1,254 an ounce in New York. Palladium slipped to $349/354 from $350/355 an ounce.
($1=118.41 yen) REUTERS CS PM1527