Gold pared losses on
Thursday after bargain hunters snapped up the precious metal on
price dips, but market players remained nervous about the
outlook for bullion after a recent sell-off.
 Dealers cited physical demand from jewellers and some Asian
investors but huge trading losses at hedge fund Amaranth
Advisors LCC raised fears of more fund selling in the
commodities markets.
 Spot gold hit an intraday low of $574.25 an ounce before
reversing and touching a high of $581.50 an ounce.
 It was quoted at $578.50/579.50 an ounce by 0656 GMT, lower
than $580.10/581.10 late in New York on Wednesday.
 "The market is still under pressure because it hasn't been
able to sustain the gains when it went up to the $585-$586
level," said a dealer in Singapore.
 "We can't rule out that we may go down to $550. But I don't
want to be too bearish since we've managed to hold above $570.
It's range trading at the moment, and if we break $570, the
bears will rejoice," he said.
 Gold tumbled to its lowest level in nearly three months at
$571.20 an ounce on Friday on fund selling -- a drop of more
than $150 since the metal spiked to a 26-year high of $730 in
mid-May.
 Key support was pegged around $550 -- a level last seen in
March.
 "Sentiment has been affected by Amaranth. People are afraid
of a spillover effect. The downside risk is there," said the
Singapore dealer.
 Amaranth Advisors LLC, a Connecticut-based hedge fund that
lost billions of dollars in natural gas trades in recent weeks,
on Wednesday took steps to disband, forging agreements to sell
its energy assets and holding talks to sell other parts of the
business, people familiar with the situation said.
 Amaranth had more than $9 billion in capital under
management before disclosing this week that its year-to-date
losses may exceed 35 percent because of bad natural gas
positions.
 The benchmark gold futures contract on the Tokyo Commodity
Exchange, August 2007, hit a three-month low of 2,181 yen per
gram before ending at 2,192 yen. That was 4 yen higher than
Wednesday's close.
 "The trend is still clearly down. Funds are still eager to
unload their positions in gold," said Shuji Sugata, assistant
manager at Mitsubishi Corp Futures and Securities Ltd.
 "Domestic players are particularly cautious about sales by
European central banks. This is having a big psychological
impact," Sugata said.
 The physical sector showed some activity as bargain
hunters
resurfaced to take advantage of the price drop and weakness in
oil prices.
"There's physical buying. It's quite a good demand as compared
with previously," said Beh Hsia Wah, a dealer at United
Overseas Bank in Singapore, adding purchases emerged around
$570 an ounce.
 Dealers expected volatile trading, with the currency
markets likely to offer leads.
 "I think we are going to find support around $559 if gold
does dip lower. I don't expect the market to hit $550 soon,"
said another Singapore dealer.
 "In the short term, I see support around $571 and
resistance at $589," he said.
 The dollar inched down after the Federal Reserve left
interest rates on hold for the second straight time at 5.25
percent and suggested inflation risks were moderating.
 The dollar dipped to 117.07 yen from 117.45 yen in late
U.S. trade. The euro inched up at $1.2709
 Silver edged down to $10.90/11.00 an ounce from
$11.02/11.09 an ounce in New York.
 Platinum fell to its lowest since June 15 to $1,121 an
ounce. It was last quoted at $1,138/1,143 an ounce in New York.
 Palladium slipped to $303/308 an ounce from $306/311 late
in New York.
Precious Metals Prices by 0702 GMT*
Metal             Last    Net change   Pct Move Gold
578.40         2.10       +0.36
Platinum       1126.00       -12.00       -1.05
Palladium       303.00        -3.00       -0.98
Silver           10.90         0.03       +0.28
Change so far in 2006
Metal       Latest bid  End prev year    Pct Move
Gold            578.40         517.20      +11.83
Platinum       1126.00         968.00      +16.32
Palladium       303.00         254.00      +19.29
Silver           10.90           8.81      +23.72