RTRS: PRECIOUS-Gold eases on profit-taking but gains expected
Gold eased from the seven-month high it hit earlier on Thursday as investors took profits, while traders said an uptick in interest in other assets such as equities was also diverting interest from bullion.
But the precious metal is likely to be gathering strength before another push towards fresh highs above $1,000 an ounce, on burgeoning interest in the metal as a haven from risk, analysts say.
Spot gold eased to $971.10/972.70 an ounce at 1010 GMT from $984.50 late in New York on Wednesday. Earlier it touched a peak of $985.95 an ounce, its strongest level since July 15.
"I still think we will test $1,000, but the market is extremely long now and we have some profit-taking," said Deutsche Bank trader Michael Blumenroth. "People are scared, so there is still a flight to safe havens at the moment."
Gold climbed nearly 5 percent this week to its Wednesday peak, as fear over the outlook for the financial system and fears over rising inflation in the longer term prompted investors to buy gold as a safe store of value.
However, profit taking and a recovery of other assets such as equities and the euro in early trade pushed the precious metal down as much as 1.7 percent.
"If we see signs the stock markets are recovering, people will come back to stocks," said Blumenroth. "If money comes back to the stock market, it will come out of gold."
Investment demand for apparently safer assets is still supporting bullion, however.
Canada-based brokerage Canaccord Adams said it has raised its peak gold price scenario to $1,100 an ounce from $950 previously, citing strong demand for the metal as a haven from risk and inflation prospects.
Buying of gold-backed exchange-traded funds in particular is very strong. Holdings of the world's largest gold-backed ETF, the SPDR Gold Trust GLD, rose 1.5 percent to a record 1,024.09 tonnes as of Wednesday. [ID:nT213601]
"Over the past month, inflows into the ETF have more than equalled mine supply...and are close to matching our estimates of total demand for gold," UBS strategist John Reade said in a research note.
"This one category of buying is almost responsible for the entire gold market, with other buying via futures, OTC, bars and coins making up the balance."
Meanwhile the dollar lost 0.4 percent against the euro in early trade, easing from three-month highs the previous day, though worries about euro zone banks' exposure to struggling eastern European economies capped gains in the single currency.
