Gold slipped on Friday after posting its largest daily percentage gain in more than a week the previous day, as the US dollar turned higher against the euro and spurred selling.
But firmer oil and equities could offer support around the three-week low of around $US700 an ounce struck on Thursday. Also aiding prices, dealers said they expected steady physical buying from India, the world's main gold consumer, during the wedding season which lasts until early next year.
Gold was trading at $US729.00 an ounce, down $US5.75 from New York's notional close. Gold fell to $US700.25 on Thursday before bouncing to a high of $US736.75 on gains in equities.
"We can continue to expect volatility for some time to come. I think the US dollar very much is the driver still,'' said Darren Heathcote of Investec Australia in Sydney.
Gold, which hit an intraday high of $US736 on Friday, has laboured to sustain the uptrend since hitting a two-month high of $US931 in early October.
"Despite gold's latest weakness and the possibility of further breakdown, I believe we arenearing a turning point in the tenor and direction of the market,'' said Jeffrey Nichols, head of American Precious Metals Advisors.
"Before long, gold will begin a new and sustainable upward march.Until then, with the yellow metal in the $US700 to $US730 range, and certainly at lower price levels, price-sensitive demand from key Asian and Middle Eastern markets should stabilise the market.''
Demand for gold jewellery has picked up in India despite a weakening rupee during the wedding season, when parents give gold to their daughters for financial security.
Despite buying from India, gold remained at the mercy of the dollar's movements, said dealers.
"As we've seen $US700 level already, there's nothing to say we will get there again at this point. It's just really that the dollar will be the deciding factor,'' said Heathcote of Investec Australia.
