Selling of scraps persisted in Asia, driven by gold's recent rise to above $930 as well as fears of falling demand for jewelry during the global economic downturn. Jewelry accounts for nearly 70 percent of global demand.
Gold was trading at $902.85 an ounce, down $2.00 from New York's notional close, but was within sight of a near four-month high of $930.40 an ounce hit last Friday. Gold struck record at $1,030.80 last March.
There's still some physical selling around. After the Chinese New Year, people continue to sell gold to take profits, said Dick Poon, manager of precious metals at Heraeus in Hong Kong.
The global economy is not doing well. They continue to reduce their inventories, said Poon, referring to selling from manufacturers.
Investment bank Goldman Sachs (GS.N) raised its forecast for the price of gold to $1,000 an ounce in the next three months from its previous forecast of $700due to rising investor demand for safe haven assets.
The gold price rally has been driven by surging demand for gold in all forms: physical gold, exchange-traded funds (ETFs), and futures contracts as investors seek 'a safe store of value' amid the financial distress and inflation risks, it said in a report.
In fact, this recent surge in gold ETF demand would more than offset a 20 percent decline in the fourth quarter global jewelry demand for gold, it said.
The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said it held a record of 859.49 tonnes of gold as of February 4, up 6.12 tonnes from February 2.
For a graphic of gold holdings by the ETF, click on:
Analysts said passage of President Barack Obama's nearly $900 billion proposed economic stimulus package would likely be inflationary and bullish for gold, and a failure would be bearish.
Investors awaited a raft of financial news that could determine the direction of the U.S. dollar, although Goldman Sachs suggested in its report a strong relationship between the price of gold in dollar-term and the exchange rate of the dollar against other currencies had begun to break down. The euro held steady ahead of a rate decision by the European Central Bank, which is s widely expected to keep interest rates at 2.0 percent.
U.S. preliminary Q4 productivity data, weekly jobless claims and U.S. factory orders for December will be released on Thursday. In other markets, the benchmark Nikkei average .N225 fell 0.8 percent on worries about the U.S. economy..T
Oil inched down on Thursday, edging closer toward $40 a barrel as share prices continue to fall and U.S. crude inventories rise under the weight of an economic slowdown.
(Editing by Michael Urquhart)
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