Singapore - Gold softened on Thursday, pausing for breath after a rally the previous day, while holdings in the world's largest gold-backed exchange-traded fund hit a record as investors sought safety from global financial turmoil.
The metal has gained as much as 10% this week as fears of a global recession lifted its safe-haven appeal.
Gold traded at $900.70 an ounce, down $5.80 an ounce from New York's notional close on Wednesday. It rose as high as $920 an ounce on Wednesday, its strongest since September 29, after coordinated interest rate cuts by major central banks failed to calm markets.
"Investors and the general public want to buy gold. $925 is a very important target. If that level is exceeded, there will be stop loss buying to $950," said Kazuhiko Saito of Interest Capital Management in Tokyo.
Gold, which hovered around $925 and $950 in July, was still well below a record high of $1 030.80 in March, when investors rushed to buy the metal on a falling US dollar and deepening financial troubles in the United States.
Holdings in the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, hit anotherrecord at 763.90 tonnes as of October 9, up from 745.22 tonnes as of October 8, which reflected investor's growing interest in the metal.
IMF warning
The International Monetary Fund issued its bleakest forecast in years, saying the world economy was set for a major downturn with the United States and Europe either in or on the brink of recession.
Gold would benefit from safe-haven buying as intervention by central banks around the world failed to calm the nerves of investors, said Darren Heathcote of Investec Australia in Sydney.
"I think we sort of looking at the cap around $920. But I suspect we'll probably look to test that again before long," he said.
Central banks around the world cut interest rates in unison on Wednesday but the move failed to help battered stocks, thaw credit markets or temper forecasts for a sharp global economic downturn.
In other markets, oil slid below $88 a barrel which also triggered light selling in gold.
The dollar rose 1.1% against the yen to ¥100.24, rebounding from a six-month low of ¥98.60 hit on Wednesday.
Platinum traded at $990.00 an ounce, down $0.50 from New York's notional close, having hit an intraday high of $1 005. Despite recent gains, fundamentals were poor due to dismal car sales, which threatened to cut demand for autocatalysts.
US auto sales will fall further in 2009 from this year's depressed levels as the escalating credit crisis hurts consumer confidence, according to auto industry research firm Global Insight.
New York gold futures fell $2.2 an ounce to $904.3 an ounce on the COMEX division of the New York Mercantile Exchange.
- Reuters