Gold prices trimmed early steep losses in thin trade on Monday, with bullion down about 2.25 percent after Wall Street stocks rallied as investors' risk tolerance increased. But the downside was limited for the yellow metal, sought as a safe-haven in times of uncertainty or fear, with some players regarding declines as buying opportunities.
"We have seen a resilient bounce off the lows. Gold has had an inverse correlation with equity markets. But there is still pent up buying in the works," said Adam Klopfenstein, Senior Market Strategist, at MF Global in Chicago. Spot gold was down 2.28 percent at $1,783.20 an ounce at 2 pm EDT (1800 GMT). Prices were highly volatile last week, sliding more than $200 from their early peak at a record $1,911.46 an ounce, dropping towards $1,700. In New York, COMEX gold for December delivery was off $10.6 per ounce at $1,786.7, a 0.60 percent decline.
US stocks rallied as a merger between two big banks in Greece suggested Europe was working through its financial problems, while a rebound in US consumer spending calmed fears of a new recession. Insurance company shares were higher after property damage from Hurricane Irene was less than feared, according to early estimates. For details, see
Gold's moves were limited in both directions by light volumes, however, with a bank holiday keeping London trade light and New York desks thinly staffed following a hurricane wracked US East Coast. Dollar strength also pressured gold prices when it gained against the yen and Swiss franc, as strong US consumer spending data reduced fears of another recession.
But, some participants noted the rally in US equity markets and mixed US economic readings, should keep gold in range for the near term "I think most of the price declines are going to be tied to equity strength. Even though gains in equities initially caused flight-to-quality buyers of gold to disappear, there's still a lot of pent up demand on price breaks where gold seems to be an asset that people want to own for the foreseeable future," Klopfenstein said. Silver was down about 2 percent at $40.44 an ounce, tracking weakness in gold prices. Spot platinum was down 0.5 percent at $1,817.99 an ounce, while spot palladium was lower at $747.95 an ounce than $752 at Friday's close.