(recasts, adds quotes, changes prices, pvs TOKYO)
By Atul Prakash
LONDON, Jan 22 (Reuters) - Gold slipped to a 3-week low in
choppy trade on Tuesday as unfavourable currency fundamentals,
falling oil and struggling stock markets prompted investors to
continue taking profits from last week's record high.
But the precious metal later pared losses as European shares
recovered and the dollar weakened against the euro on market
talk of interest rate cuts by central banks.
Spot gold <XAU=> fell as low as $849.50 an ounce before
trimming losses to $860.70/871.40 by 1223 GMT, still down from
$867.10/867.80 in late European trade on Monday.
"We might well see further weakness today and tomorrow.
There is scope to take profits in the precious metals market and
pay for losses elsewhere," said Robin Bhar, metals analyst at
UBS Investment Bank.
"At the moment, forced liquidation is dominant but at some
stage that would give way to buying of gold. It's an undoubted
store of value when people are frightened enough," he said.
Investors have been booking profits from gold's recent
record high, hit at $914 an ounce, to cover margin calls on
hefty losses in global equities and other assets exposed to the
risk of a global economic slowdown.
Analysts said the U.S. stock market open would be key,
adding that a woeful start after a public holiday on Monday,
could spark further liquidation of gold.
"Further weakness may be seen today as U.S. traders return
from their long weekend, and investors use their more liquid
assets, such as precious metals, to cover further equity margin
requirements," said James Moore, analyst at TheBullionDesk.com.
"However the current correction is likely to be positive for
gold going forward as it will encourage further investment into
the safe-haven assets," he said in a report.
GLOBAL CRISIS?
Comments from IMF Managing Director Dominique Strauss-Kahn
on Monday that all developed countries were suffering from the
U.S. slowdown entrenched fears that global growth was hitting a
wall.
Adding to the gloom, billionaire investor George Soros said
the world was facing the worst financial crisis since World War
Two and the United States was threatened with recession.
The U.S. Federal Reserve meets on Jan. 29/30 but
expectations are mounting that it may be forced to move earlier
in an attempt to steer the U.S. economy away from a recession.
A rate cut tends to weaken the dollar and prompts investors
to switch to alternative assets, including gold. A gloomy
economic picture also often helps the metal, traditionally seen
as a safe-haven asset.
Oil also put pressure on the market, with prices falling by
more than $4 a barrel to a new 6-week low as global stock
markets swooned on the growing prospect of a recession.
In other bullion markets, U.S. gold futures slid, with the
most active February contract fell $25.20 to $856.50 an ounce.
Platinum was at $1,525.50/1,530.50 an ounce after falling to
a one-month low of $1,507, against $1,539.50/1,544.50 in Europe
on Monday. Silver <XAG=> was up 3 cents at $15.64/15.69, while
palladium was down 50 cents at $362.50/367.50.
"Platinum and palladium are also faltering under the weight
of the market sell-off. Both these metals are under pressure as
an industrial slowdown caps upside for now," said Walter De Wet,
analyst at Standard Bank.
(Additional reporting by Chikafumi Hodo in Tokyo)
(Reporting by Atul Prakash; editing by Veronica Brown)
