Gold moved higher on Thursday after the Federal Reserve slashed interest rates, but weaker oil prices limited gains and prevented the metal from breaking recent record highs.
Some analysts said the metal, which has gained 12 percent this year on top of a 32 percent surge last year, had become vulnerable to sharp sell-offs, but momentum buying could lift prices higher in the near term.
Spot gold rose to $923.10/924.00 an ounce at 6:25 a.m. EST from $921.10/921.80 late in New York on Wednesday, when it rallied to $932.00 -- just below Tuesday's all-time high of $933.10 -- after the U.S. Federal Reserve cut interest rates.
Gold is looking very tired. I just sense that the momentum has gone out of gold. We know that the market is generally long here and I am still very wary of a correction, said John Reade, head of metals strategy at UBS Investment Bank.
There's potential for a deep correction which could easily be as much as $100, but the timing of that correction is very difficult to say, he said.
Bullion investors watched the dollar, which recovered from an earlier 2-month low against a basket of currencies as the focus switched to troubles in the financial sector and away from Wednesday's 50 basis points rate cut to 3.00 percent by the Federal Reserve.
Fitch Ratings on Wednesday downgraded the credit ratings for Financial Guaranty Insurance Company's (FGIC) main bond insurer unit, stoking worries about possible downgrades for other companies in the sector.
The market also awaited the release of U.S. economic data, including December personal consumption expenditure figures -- the Fed's favorite inflation measure -- as well as weekly jobless claims, both at 8:30 a.m. EST.
The economic data is likely to point to an increased recession risk, which might be positive for gold, Dresdner Kleinwort said in a daily report.
A U.S. rate cut reduces the opportunity cost of holding dollar-priced gold and also tends to weaken the U.S. currency
-- making bullion more attractive for non-U.S. investors. The metal is also traditionally seen as a hedge against inflation.
Oil fell more than $1 to $91 a barrel.
Gold has moved so far, so fast and is now consolidating around $920. But we think that there is more potential for buying, especially if the dollar remains weak, said Frederic Panizzutti, metals analyst at MKS Finance.
In other bullion markets, U.S. April gold futures firmed $1.9 to $928.20 an ounce, but were off Wednesday's record high of $942.20.
The benchmark gold futures contract on the Tokyo Commodity Exchange ended 13 yen per gram higher at 3,195 yen.
In industry news, South Africa's Gold Fields (GFIJ.J: Quote, Profile, Research), the world's fourth-ranked gold producer, posted a 50 percent jump in second quarter adjusted earnings per share.
Platinum rose to $1,700/1,704 from $1,684/1,688 an ounce in New York. Silver fell to $16.73/16.78 an ounce from $16.82/16.87, while palladium fell to $381/385 an ounce from $386.00/389 in the U.S. market.
(Reporting by Atul Prakash; editing by Peter Blackburn)