Gold slid under the $800 mark in increasingly volatile conditions on Wednesday, as softer oil prices and a firmer dollar against the euro dented the metal's wider appeal for investors.
Spot gold hit an intraday high of $815.30 but later fell sharply, losing more than 2 percent at one point to a low of $792.10.
Bargain hunters stepped in at the lower levels to pare losses to $798.05/798.75 an ounce by 1150 GMT from $811.90/812.70 quoted late in New York on Tuesday.
The dollar edged up to one-week highs against the euro on Wednesday as investors took profit from the U.S. currency's tumble to multi-year lows, while oil prices softened to below $94 a barrel.
A stronger dollar makes gold dearer for non-U.S. buyers while easing oil prices take the heat out of gold's role as a hedge against oil-led inflation.
Selling today was initially triggered by the strengthening dollar and increased speed after pivotal chart points were broken, said Alexander Zumpfe, precious metals trader at Heraeus in reference to gold dipping below support at $800.
However, traders generally remained confident on the metal's ability to contain losses below $800 due to expectations for further dollar losses as investors anticipated cuts in U.S. borrowing costs that would dent the dollar's yield appeal.
Investors were looking out for a series of U.S. data including existing home sales in October and the Federal Reserve's beige book report that provides an anecdotal summary of economic conditions nationwide.
Given the still bearish outlook for the dollar and the scale of volatility in the equity markets we still expect dips to be viewed favorably, analyst James Moore of TheBullionDesk.com said in a note to clients.
Gold hit a 28-year peak above $845 on Nov 7, but has since stalled twice in attempting to reach those levels again. Analysts are refusing however to rule out another run to the November peak and a record high seen in January 1980 at $850.
GOLD DEHEDGING SLOWS
In other bullion markets, benchmark October 2008 gold futures on the Tokyo Commodity Exchange ended 76 yen per gram or 2.6 percent lower at 2,837 yen.
COMEX gold futures extended losses with the most active December contract trading down $15.60 at $798.30.
Gold de-hedging slowed markedly in the third quarter of this year, with 0.98 million ounces or 31 tonnes taken off the global producer hedge book, a study from precious metals consultant GFMS showed.
Hedging allows producers to sell as yet unmined output at a set price on forward markets, guaranteeing a minimum price. But companies have preferred to buy back previously hedged output to take advantage of rising bullion prices.
Platinum hovered well below a record high of $1,486 an ounce hit on Monday but was supported by supply concerns. Spot platinum fell to $1,423/1,428 an ounce from $1,443/1,448 in New York.
South Africa's National Union of Mineworkers will strike on December 4 in a one-day protest against deaths in the country's mines, halting production in the world's biggest producer of gold and platinum.
Palladium fell to $340/345 an ounce from $351/354.
Silver dipped to $14.23/14.28 an ounce from $14.39/14.44 late in New York.