Gold drifted lower on Monday tracking weaker oil but held above $800 an ounce, with an ailing dollar and positive fundamentals seen helping the metal to touch a record high set in early 1980.
Investors also cashed in on gold's impressive rally, but dealers noted buying at lower levels resulting from tensions in Pakistan after President Pervez Musharraf declared a state of emergency to deal with rising militancy and a hostile judiciary.
Supply concerns following strike threats in South Africa, the world's largest producer of the metal, were also expected to support gold that has jumped 28 percent this year and doubled in about three years.
It is certainly a question of when, not if, we get to $850, but there is nothing on the immediate horizon to generate the fresh momentum needed. A short period of consolidation seems in order, said Tom Kendall, metals strategist at Mitsubishi.
However, if we get a third week of sharp falls in U.S. crude stocks on Wednesday, that could be sufficient to push oil back up towards $100 and give gold another boost at the same time, he said.
Gold, seen as a safe-haven asset and a hedge against inflation, fell to $801.30/802.10 an ounce by 1056 GMT from $807.70/808.50 in late New York. Gold hit a high of $807.60 earlier on Monday, just below Friday's 28-year high of $807.70.
The metal hit a record high of $850 in January 1980. After adjusting for inflation, it was equal to $2,079 at 2006 prices.
Oil fell 1 percent, dragged down by fears of potential economic fallout in the United States from a worsening subprime crisis and by easing tensions in the Middle East.
Currency investors' risk appetite was hit after Citigroup Inc said on Sunday its Chairman and Chief Executive Charles Prince had stepped down and it may write off an extra $11 billion of subprime mortgage losses.
The Citigroup news, coupled with falls in equities, kept the dollar near record lows versus the euro and a basket of major currencies despite U.S. data on Friday showing a surge in October jobs growth well above expectations.
A weaker dollar makes gold cheaper for other currency holders and often lifts bullion demand.
Gold is showing no signs of looking back, said Pradeep Unni, precious metals analyst at Vision Commodities, in Dubai.
Fundamentals leave little room for interpretation, supply problems have emerged, speculative demand is in the surge, crude is showing no signs of cooling and the dollar is bombarded by the re-emergence subprime mortgage/credit crisis, he said.
AngloGold Ashanti Ltd, the world's third-largest gold miner, said it expected a government inspection to be conducted on Monday at one of its larger mines, which was shut on Friday after a miner was killed in a rock-fall.
A spate of deaths in South Africa's mines, some of which are the world's deepest, has set the 300,000-strong National Union of Mineworkers and mining firms on a collision course. The union wants its members to down tools for one day in protest against what it calls genocide in the mines.
In other markets, Japanese gold futures reached a 23-year high. U.S. futures edged down, with the most active December contract trading at $803.9, down $4.5 from late on Friday, when it surged above $810.
Platinum fell to $1,452/1,456 from $1,454/1,459 an ounce in New York, while palladium eased $2 to $371/375. Silver dipped to $14.44/14.49 from $14.58/14.63.