Gold reversed early losses as bargain hunters resurfaced after bullion posted its biggest daily%age fall in almost eight weeks the previous day, but weaker oil and equities are likely to cap gains.
Platinum also bounced from a near two-week low and could find support around the current levels, with dealers expecting selling by speculators in Japan to subside because of the narrowing spread between the white metal and gold.
Gold was trading at $US773.95 an ounce, up $US3.35 from New York's notional close on Monday, when broad-based commodities Reuters/Jefferies CRB indexalso tumbled more than 3%, led by a 9% fall in crude oil.
Bullion hit an intraday low of $US762.55, its weakest in nearly two weeks, in early trade on Tuesday before bouncing to track a firmer euro against the US dollar.
"The increase in net long positions in New York could mean some people are increasingly bullish on gold. I guess we will now be looking at the $US750 regions for support now,'' said a dealer in Singapore, referring to the 25-day moving average.
"The crisis in Thailand may have some impact on gold but it's going to be minimal. The focus seems to have shifted back to the gobal economy again,'' he said.
But falling equities markets could still force investors to sell bullion to cover losses amid signs of a deepening global economic downturn, which could cut investors' appetite for risky assets.
In a sign of how drastically the deepening economic gloom was curbing demand, US manufacturing in November fell to its weakest in 26 years. A similar reading on euro zone factories sank to a record low. And the National Bureau of Economic Research, regarded as the arbiter of US recessions, made official the economy had sunk into recession as early as December last year.
Speculative gold players in the non-commercial category boosted their net long positions to 81,872 on gold futures traded on COMEX at Nov. 25, up from 64,829 long lots at Nov. 18, Commodity Futures Trading Commission data showed.
Gold has regained some strength since hitting a 13-month low of $US680.80 in October but was still well below a record of $US1,030.80 in March. The political crisis in Thailand could spur safe-haven buying, although many jewellers were likely to stay away from the market as the year-end approached.
A bomb blast killed an anti-government protester and wounded 22 at Bangkok's blockaded Don Muang airport on Tuesday, hours before the ruling in a vote fraud case that could deal a crippling blow to the government.
