Gold edged down on Thursday as investors waited for more clues on the state of the global economy after prices rallied toward a record this week, but falling shares could spur another round of safe haven buying.
The Nikkei dropped 1.5 percent to a seven-month low on Thursday after U.S. stocks tumbled, as investors dumped riskier assets on the back growing fears of a double-dip recession for the global economy. .T .N
Spot gold fell $1.65 to $1,239.70 an ounce by 0247 GMT, having hit a high of $1,262.45 on Monday -- within sight of a lifetime high above $1,264 struck last week.
Gold is increasingly vulnerable to profit taking by investors, said Ong Yi Ling, investment analyst at Phillip Futures.
On the mid-term to long-term basis, the uptrend for gold is definitely still there. Economic worries will continue to support the gold price, so on the long-term, definitely the uptrend for gold still remains, she said.
Bullion gained than 11 percent in the second quarter as investors seeking safety from turmoil in the financial markets lifted the metal to its best quarterly performance since the fourth quarter of 2007.
But investors who had bet the price would rally to $1,250 were closing off their positions to book profits, capping gold on the upside.
U.S. gold futures for August delivery fell $5.1 an ounce to $1,240.8.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust (GLD.P), said its holdings were unchanged at a record of 1,320.436 tonnes.
Gold shrugged off data that showed China's official purchasing managers' index (PMI) fell to 52.1 in June from 53.9 in May, weaker than the median forecast of 53.1. Maybe if you see the numbers are better-than-expected, it can also potentially exert some downward pressure for gold prices because it encourages a bit of risk taking, said Ong at Phillip Futures.
The euro hit a lifetime low against the Swiss franc on Thursday, as weaker-then-expected Chinese data added to doubts about the strength of the global recovery, while jitters about funding strains in the euro zone lingered.
Crude prices fell for a fourth consecutive day on Thursday to below $75 on signs that China's economic growth is slowing, while the dollar strengthened as Europe's debt woes kept simmering across financial markets.
(Editing by Michael Urquhart)