Gold recoiled after tapping a new record on Thursday, heading for its biggest daily loss in over a year as a rebound in U.S. stocks and an increase in trading margins fanned profit-taking from the biggest rally since 2008.
Prices slumped nearly 3 percent and fell nearly $80 from their overnight peak in one of the biggest daily swings ever. Yet analysts showed no signs of revising their overwhelmingly bullish view of gold, up nearly 20 percent since June as investors seek safer havens amid global debt crises and a darkening economic outlook.
Concerns of a deepening European crisis and the possibility of distress among French banks helped propel gold to a record $1,813.79 an ounce in Asian trading. While equity investors swooped in to scoop up bargain stocks on Thursday, underlying worries are unlikely to disappear soon, analysts said.
Traders said steeper margin requirements also would not stop gold's long-term advance. Late on Wednesday, the CME Group Inc. (CME.O) hiked margin requirements for 100-ounce gold futures by 22 percent, the biggest rise in about 1-1/2 years and the first such rise since January.
"Once again, gold's decline is indicative of a sell-off of safe haven assets, more of a risk on type trade today," said David Meger, director of metals trading of commodity broker Vision Financial Markets, Chicago.
"The European sovereign debt issue is going to remain an ongoing issue, and the economy moving forward is concerning. All of the positive factors that have been supporting gold for the last several months are not dissipating. Inevitably, we view this as a pullback within an uptrend."
As Wall Street stocks extended an early rally to nearly 4 percent, gold maintained a tight inverse correlation. The spot price for bullion fell 2.6 percent to $1,745 an ounce at 1:54 p.m. EDT, reversing Wednesday's sharp gains and on track for the biggest daily loss since July 2010.
Gold futures fell 2 percent to $1,748 an ounce.
The intra-day trading range stood at $72 an ounce, the third-widest in Reuters data going back to 1983. Tuesday's range was the sixth biggest ever.
COMEX gold trading volume looked set to cool after Tuesday's record-breaking 437,000 lots, with slightly more than 300,000 lots having traded by midday.
Investors were cashing in gains from a four-day rally that had boosted prices by nearly 9 percent. That run briefly carried into Thursday, but was cut short by news the CME would raise speculative margins to $5,500 per contract from $4,500, effective from the close on Thursday.
Gold was "overextended to an extent that requires a setback," said Ole Hansen, senior manager at Saxo Bank. "The CME has shown its hand, and given average daily price swings has moved toward 3 percent, a margin of 5500 still seems to little, so we are expecting further hikes."
He said gold could potentially fall toward $1,700 an ounce if this moves gathers pace, "considering how much hot money has come in over the last week."
Traders had also noted that the 14-day Relative Strength Index (RSI) had surged to above 85 for the first time since last October, deep into overbought territory. It pulled back on Thursday to 76, still relatively high.
Heavy losses in the global stock markets have highlighted gold's appeal as a safe store of value. After a wobbly start, world shares rallied as U.S. markets firmed on relatively positive weekly jobs data and solid results from Cisco. .N
(Additional reporting by Amanda Cooper and Jan Harvey in London and Frank Tang in New York; Editing by David Gregorio and Alden Bentley)