(Updates prices, adds analyst comment)
By Anna Ringstrom
LONDON, March 20 (Reuters) - Gold fell sharply on Thursday
as investors took profits on a rally earlier this week that took
prices to a record above $1,000 an ounce but analysts said
bullion still held long-term appeal.
The flagship precious metal <XAU=>, widely seen as a safe
haven asset as well as a hedge against inflation, peaked on
Monday at $1,030.80, up 23 percent since the start of the year.
But on Thursday spot gold fell as much as 4 percent to a
one-month low as investors sought cash to cover margins and
losses in other markets.
It bottomed at $904.65 -- a level last seen on Feb. 18 --
versus $944.20/945.00 late in New York on Wednesday, before
paring some losses to trade at $921.90/922.80 at 1600 GMT.
Commodities have stumbled across the board for two days,
with gold diving 6 percent on Wednesday in a dash for cash which
analysts said was sparked by a smaller-than-expected U.S. rate
cut on Tuesday.
"There has been a lot of long liquidation, I think primarily
driven by the flee to cash to cover other losses ... especially
in equities and currencies," said Daniel Hynes, metals analyst
at Merrill Lynch.
Dan Smith, analyst at Standard Chartered, said he saw some
support for the market at $900 an ounce and then again at $850,
adding that trading could be "pretty rocky" in the near future.
"We are looking for the dollar to strengthen short term
which will keep gold in check for the time being," he said.
"But medium term we are still bullish on gold and looking
for it to push more convincingly through 1,000 towards the back
end of this year."
The dollar strengthened broadly on Thursday in spite of
investor anxiety over troubled credit markets, as investors
cashed in positions on gold and other commodities to cover short
exposure to the beleaguered U.S. currency.
"I think gold will remain under pressure today and it could
drag on into next week. But I don't think we are too far off
some good support levels which may see it rebound," Hynes said.
UBS said in a research note it too expected gold to remain
volatile in the short term, being caught up in the broader
deleveraging trend.
"We are now at very attractive levels in many precious and
base metals, but it is impossible to stand in the way of the
relentless selling," the bank said.
Other precious metals followed gold. Silver <XAG=> dropped
near 7 percent at 1600 GMT to $17.16/17.56 an ounce from
$18.38/18.43 in New York.
Platinum <XPT=> fell 2 percent to $1,850/1,860 an ounce from
$1,900/1,910 -- off a record high of $2,290 hit on March 4 --
while palladium <XPD=> fell 6 percent to $428/435 an ounce from
$455/460.
(Additional reporting by Bate Felix, editing by David Evans)
