Reply #11: Gold off 3-week low as buying emerges, Tokyo tumbles

[EuroObserver]

SINGAPORE, Feb 8 (Reuters) - Gold fell to a three-week low on Wednesday before staging a rebound as lower prices ignited new buying interest from jewellers and investors in parts of Asia and the Middle East. Other precious metals weakened, with platinum falling to its lowest in nearly two weeks.

Spot gold <XAU=> fell to as low as $546.90 an ounce before rebounding to $550.00/550.75 an ounce by 0550 GMT, steady from $549.80/550.70 late in New York on Tuesday, when the metal dropped more than $20 an ounce -- its biggest one-day decline in dollar terms in nearly 13 years.

Gold, used in jewellery and as an investment, rose to its highest price in 25 years at $574.60 last week due to tensions over Iran's nuclear ambitions, worries about the outlook for the dollar and rising energy costs.

"We are still in an upward trend. The fundamentals are still in place, but I think we are having a bit of a shake-out," said Darren Heathcote, head of trading at N M Rothschild in Sydney. "I think the scope is great to move down to the lows of the $525 area before building again for another move up," said Heathcote, who pegged immediate resistance at $553.50.

Gold's 14-day relative strength index (RSI) stood at 35.42 on Tuesday, down from 72.54 on Feb. 2. The market views an RSI of 30 or less as oversold and 70 or more as overbought.

Dealers and analysts said that despite the heavy losses on Tuesday, gold still has the potential to rally again after a pause. Some expect the metal to eventually hit $600 in coming months -- a level last seen in December 1980.

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