Sydney - Gold returned early gains and then some on Monday, with equity markets plunging in Asia as investors digested the latest series of government interventions.
Gold popped up almost 2% early on as investors scoured for safe havens amid fresh government efforts to calm financial market turmoil, before retracing by more than $20 at one point.
Spot gold was quoted at $727.60 an ounce at 06:03 GMT versus $731.50 on Friday.
Australia's central bank stepped into currency markets in European trade on Friday to support the local currency, while the US was bracing for an interest rate cut later this week.
In an emergency meeting, South Korea slashed its official rate 75 basis points percent.
"We're seeing some follow through interest in gold today which has more to do with reaction to all the events going on than the metal," said a bullion dealer in Sydney.
Merrill Lynch in a report cut its average gold price forecast for 2008 by 2.7% to $885 an ounce. Gold sold for a record $1 030.80 on March 17.
US gold futures for December delivery rose $7.20 to $737.50 an ounce, after falling below $700 last week.
Oil sending mixed signals
The US Federal Reserve is expected to cut lending rates at a two-day policy meeting this week in response to unprecedented turmoil in financial markets. The consensus among Fed watchers is for a half-point cut in overnight rates to 1%.
By early afternoon, gold showed little safe-harbour resilience against further declines in stocks, as Australian, Japanese and other Asian bourses tumbled.
However, Goldman Sachs said gold's reputation was intact.
"We remain of the view that in the current global financial turmoil, there will be a time when there is a flight to safety of gold and an upward US dollar gold price trajectory," it said in a report.
Some gold mining stocks bucked the downtrend, with Australia No. 1 and No. 2 miners, Newcrest Mining, each up 2.6%.
Oil - hovering just above $64 a barrel after falling near $4 in the previous session - was sending mixed signals to bullion markets, which normally turn to oil for a read on inflationary pressures.
An overnight Lundberg survey showed the average retail price for a gallon of gasoline in the United States plunged more steeply than ever over the last two weeks as the economic slowdown weighed on crude oil.
Spot platinum was quoted $802.00 an ounce versus $787.50 in New York on Friday.
Spot palladium was up $1 to $166.00 an ounce.
Spot silver was fetching $9.25 an ounce versus $8.63 in New York on Friday. Silver continued to rebound after dropping as much as 10% on Friday.
- Reuters