Gold edged down on Friday as speculators booked profits after prices rallied more than 2 percent the previous day, but buying interest from investors remained strong, with ETF holdings hitting another record.
Platinum dropped more than 1 percent on fears of falling demand after Ford Motor Co reported a record loss, while silver rallied to its strongest in four months before slipping to track weaker gold.
Gold was trading at $905.70 an ounce, down $1.05 from New York's notional close on Thursday, when it jumped more than 2 percent after US stocks tumbled on fears of a worsening recession.
Gold held near a three-month high of $915.30 hit on Monday but some dealers were cautious as high prices blunted demand from the jewellery sector, which accounts for nearly 70 percent of consumption. Imports by main consumer India also shrivelled more than 90 percent, to 1.2 tonnes, in January.
"As the prices rise due to investment demand, enquiries have certainly increased in the physical markets, but it hasn't resulted in any significant take off from the markets," said Pradeep Unni of Richcomm Global Services in Dubai.
The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said it held arecord 843.59 tonnes of gold on Jan 29, up 10.71 tonnes fromJan. 27, reflecting flight-to-quality buying amid financial sector chaos.
Despite slow buying from jewellers, dealers said changes in gold ETF holdings could be a bullish signal as they show longer-term retail investors are entering the market.
Volatile stock and currency markets prompted the funds to shift their money back into gold for better returns, said Yukuji Sonoda, precious metals analyst at Daiichi Commodities in Tokyo.
"The next target is of course $1,000," said Sonoda, referring to a level last seen in March, when gold struck a record $1,030.80 on fund buying driven by fears of rising energy costs and uncertainties in the dollar's outlook.
"Silver is also very interesting. Actual buying is a good support for the price," said Sonoda, adding that the white metal also benefited from investment buying.
Silver's appeal as a refuge for investors worried about financial instability will help it perform better than its rivals platinum and palladium, a Reuters survey showed.
In other markets, the Nikkei shed 3.1 percent on a firmer yen and recession worries. Adding to the gloom, Japanese industrial production fell a record 9.6 percent in December, while core annual inflation slowed to 0.2 percent.
