LONDON, May 22 (Reuters) Volatile gold prices fell 3.5 percent to their lowest in nearly four weeks on Monday and dragged down mining shares as a firm dollar prompted investors to get out of the market, dealers said.
Other precious metals also declined, with silver slipping four percent to a one-month low before partially recovering.
''It's going to be extremely volatile. There is greater risk-aversion now and that means people are more hesitant,'' Stephen Briggs, economist at SG Corporate and Investment Banking, said.
''But this has now become a big enough correction for people to sit up and take notice,'' he said, adding that the long-term bull trend remained intact as investors thought the dollar would fall in future.
Gold reached a high of $661.25 an ounce before falling as low as $636.20 as selling accelerated. Spot gold was at $644.50/645.50 by 0939 GMT, against $659.20/660.00 in New York.
The dollar gained ground, boosted by volatility in global equity and commodity markets as investors switched from riskier assets into cash.
A firm dollar makes dollar-priced gold more expensive for holders of other currencies.
The dollar built on gains made late last week when investors shifted money into U.S. assets, and dealers said the currency was ready for a correction after its rapid fall over the past couple of weeks.
Some dealers said gold was consolidating after hitting new peaks recently, with plenty of buying interest waiting at lower levels.
Gold demand in India, the world's largest consumer, resurfaced on the dips.
In other markets, copper came under pressure as investors continued to pull money out of commodities, including gold and oil.
[ID:nSP106319] BULL RUN NOT OVER Gold added $100 in one month to hit a 26-year high of $730 on May 12, but eroded almost all those gains in the following 10 days. At its peak this month, the metal was up 74 percent from a year earlier.
''Despite some speculating the bull run for gold is over, in my view there are still far too many factors in favour of being long gold, with $850 remaining a realistic target for later in the year as investment demand continues to swell prices,'' James Moore of TheBulliondesk.com said in a note.
Mining stocks were hit, with Newcrest Mining Ltd., Australia's top gold miner, shedding 10 percent, gold and copper miner Oxiana Ltd. losing 11.4 percent. Zijin Mining Group Co. Ltd <2899.HK> dropped about 14 percent.
South African stocks fell more than 2 percent, while the gold mining index <.JGLDX> was down 3.15 percent in early trade.
In Japan, benchmark gold futures <0#JAU:> on the Tokyo Commodity Exchange, currently April 2007, dropped by the daily 60-yen limit to 2,434 yen per gram on profit-taking by Japanese investors.
''I think the market will try to climb back up, perhaps to the $671 to $675 level,'' said a dealer in Singapore.
Platinum rose to a high for the day of $1,298 an ounce but then dropped to a one-week low of $1,270 and was later quoted at $1,276/1,286.
Palladium was at $337/342 an ounce, against $338/343. It hit a low of $330 on Friday -- its lowest since April 5.
Silver fell as low as $11.90 an ounce -- its weakest since April 24 -- before rebounding to $12.17/12.27, still down from $12.38/12.48 in the U.S. market.
REUTERS CS PM1736
Other precious metals also declined, with silver slipping four percent to a one-month low before partially recovering.
''It's going to be extremely volatile. There is greater risk-aversion now and that means people are more hesitant,'' Stephen Briggs, economist at SG Corporate and Investment Banking, said.
''But this has now become a big enough correction for people to sit up and take notice,'' he said, adding that the long-term bull trend remained intact as investors thought the dollar would fall in future.
Gold reached a high of $661.25 an ounce before falling as low as $636.20 as selling accelerated. Spot gold
The dollar gained ground, boosted by volatility in global equity and commodity markets as investors switched from riskier assets into cash.
A firm dollar makes dollar-priced gold more expensive for holders of other currencies.
The dollar built on gains made late last week when investors shifted money into U.S. assets, and dealers said the currency was ready for a correction after its rapid fall over the past couple of weeks.
Some dealers said gold was consolidating after hitting new peaks recently, with plenty of buying interest waiting at lower levels.
Gold demand in India, the world's largest consumer, resurfaced on the dips.
In other markets, copper came under pressure as investors continued to pull money out of commodities, including gold and oil.
[ID:nSP106319] BULL RUN NOT OVER Gold added $100 in one month to hit a 26-year high of $730 on May 12, but eroded almost all those gains in the following 10 days. At its peak this month, the metal was up 74 percent from a year earlier.
''Despite some speculating the bull run for gold is over, in my view there are still far too many factors in favour of being long gold, with $850 remaining a realistic target for later in the year as investment demand continues to swell prices,'' James Moore of TheBulliondesk.com said in a note.
Mining stocks were hit, with Newcrest Mining Ltd.
South African stocks fell more than 2 percent, while the gold mining index <.JGLDX> was down 3.15 percent in early trade.
In Japan, benchmark gold futures <0#JAU:> on the Tokyo Commodity Exchange, currently April 2007, dropped by the daily 60-yen limit to 2,434 yen per gram on profit-taking by Japanese investors.
''I think the market will try to climb back up, perhaps to the $671 to $675 level,'' said a dealer in Singapore.
Platinum
Palladium
Silver
REUTERS CS PM1736
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