SINGAPORE: Gold traded in a tight range near $1,775 per ounce on Tuesday, after dropping for two straight sessions, as a firm dollar amid persistent worries about the euro zone debt crisis and global growth kept a lid on gains.
But speculative interest in gold remained strong as stimulus measures launched by key central banks in September continued to drive investors to gold, a hedge against inflation and currency debasement caused by looser monetary policy.
Holdings in the gold-backed exchange-traded funds rose to a historic high of 74.73 million ounces by Oct. 7, up 6 percent over the past two months during which gold prices climbed nearly 10 percent.
But higher prices have curbed physical demand in Asia, especially as a global slowdown has started to impact the economies in the key gold consumers in the region, including China and India.
"The jewellery sector has been badly affected, as people are reluctant to spend," said a Singapore-based trader. "The lack of physical demand is worrying."
The recent price rally, up nearly 10 percent over August and September, has triggered a wave of scrap selling in Southeast Asia. In major consumer India, festival season demand may fall short of last year, he added.
Many buyers, however, are waiting on the sidelines for the next price dip, as price outlook remains bullish for gold.
"People will quickly come back to the market when prices drop $30 to $50, and we'll see gold breaking above $1,800 by the end of the year after a healthy correction," the Singapore-based trader said.
Spot gold was little changed at $1,775.46 an ounce by 0635 GMT, rebounding from a one-week low of $1,766.14 hit on Monday. Gold fell almost 1 percent over the last two sessions, its sharpest two-day decline since August.
US gold crawled up 0.1 percent to $1,777.60.
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