Gold prices eased a touch in holiday-thinned trade on Monday as investors took bets on higher prices off the table, disappointed by a lack of clear guidance from the Federal Reserve on Friday on the options for U.S. economic stimulus.
The metal lifted from early lows, however, and steadied after last week's extreme volatility, as speculation grew that the Fed may announce a fresh round of quantitative easing next month. The same talk lifted stocks and weighed on the dollar.
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Spot gold was down 0.7% at $1,815.10 an ounce at 0935 GMT, having earlier slipped as low as $1,806.29. Prices slid more than $200 late last week from their early peak at a record $1,911.46 an ounce, dropping towards $1,700.
"Gold recovered strongly after the wild swings during the week, and after a lot of weak longs were flushed out and with speculative long positions still being reduced, it has now got room to the upside," said Saxo Bank senior manager Ole Hansen.
"However, until we see additional news from the economies and the banking situation in Europe it will most likely settle into a wide range in the days ahead."
"The sharp sell-off last week was a reminder that markets never move in a straight line, and it will probably slow down, but not stop, further progress to the upside," he added.
Last week's heavy selling saw speculators cut long positions in U.S. gold futures and options for a third straight week even as bullion prices shot up, data from the U.S. Commodity Futures Trading Commission showed.
Holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust , recorded an outflow of nearly 60 tonnes last week, its largest weekly outflow since the fund was launched in November 2004.
Investors were unsettled ahead of Bernanke's speech at Jackson Hole, Wyoming, on Friday, amid speculation that a further round of quantitative easing would be announced.
"The market didn't really get much insight as to what the Fed may or may not do," said Darren Heathcote, head of trading at Investec Australia. "It is an opportunity to take some profit off the table."
U.S. gold futures for August delivery were up $20.50 an ounce at $1,817.50. Prices are expected to be rangebound on Monday, with London closed for the August Bank Holiday.
Speculation that more easing may yet be unveiled next month in the face of an uncertain growth outlook weighed on the dollar on Monday and helped lift European stocks.
Bund futures fell on signs that the U.S. Federal Reserve would consider a fresh batch of economic stimulus at September's Fed policy meeting.
"An extra day of deliberations scheduled for the September FOMC meeting kept hope of another QE3 on the table," said ANZ Bank in a note on Monday.
Further quantitative easing -- which basically translates as printing money -- would likely further undermine the dollar, boosting gold's appeal as a safe store of value. Much of the metal's rally to record highs came on the back of last year's round of easing.
A survey released on Sunday showed a drive to benefit from record bullion prices lifted Australian gold production by 10%, or 24 tonnes, to 270 tonnes in the 2010/11 financial year, maintaining Australia's No. 2 ranking as a gold producer behind China.
Among other commodities, Brent crude steadied around $111 on Monday, as a weaker dollar offset concerns of supply disruptions as oil refiners and terminals along the U.S. east coast weathered the worst of a tropical storm.
Silver was down 1.1% at $41.00 an ounce, tracking weakness in gold prices. Spot platinum was up 0.3% at $1,833.74 an ounce, while spot palladium was up 0.2% at $753.50 an ounce.
The Business Day newspaper in South Africa reported on Monday that members of the republic's parliament are seeking amendments to strengthen the country's mining charter, aimed at ensuring the industry is at least 26% black-owned by 2014.
South Africa is the world's biggest producer of platinum, accounting for nearly four out of five ounces of world mine production. It is also a major producer of gold and palladium.