Gold up on economic worries

Gold erased some of its early gains on Tuesday but held near its strongest level in more than a month on worries about global economic recovery, while jewelers were also happy to cash in on the high prices.
With weak economic growth around the world igniting talk of deflation, investors are likely to chase gold, U.S. Treasury and currencies seen as safe harbor such as the yen and Swiss franc. Other precious metals tracked gold higher.
Spot gold hit an intraday high of $1,225.10 an ounce before easing to $1,223.30 by 0524 GMT (1:24 a.m. EDT), steady from New York's notional close. Gold rose as high as $1,227.15 on Monday, its highest since early July.
Dealers in Hong Kong and Singapore saw a mixture of buying from investors and selling from jewelry makers, with bullion prices already rebounding more than 5 percent since falling to a three-month low in late July.
There was light physical buying from top consumer India as demand is set to pick up for the busy festival season, starting with Raksha Bandhan on August 24 and extending till Dhanteras in November, the single biggest gold-buying day.
"We can say buying from investors have pushed the market up. The economy is uncertain," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
"I think we are slightly bullish for the time being but we may see a little bit of a correction. We may slip to $1,115 and $1,120 and find support there. Selling in physicals caps the market," he added.
According to Reuters market analyst Wang Tao, spot gold may retrace to $1,211 per ounce or lower to $1,190, as a strong resistance is observed at $1,224.
Bullion struck a record around $1,264 in June on worries the euro debt crisis was spreading.
U.S. gold futures for December delivery were barely changed at $1,225.8 an ounce. The contract also rose to its highest in more than a month on Monday on weaker dollar and high degree of uncertainty about the global economic recovery.
"I think people will be selling at this price but I think sentiment is pretty bullish at the moment," said a physical dealer in Singapore. "But at the moment, my customers are taking the advantage of the high price to sell."
The U.S. dollar headed toward a 15-year low against the yen on Tuesday and Japanese shares slid on weak U.S. data. Other Asian stock markets were slightly firmer although analysts said there was little reason for them to rise much higher given the weak sentiment.
U.S. home builders' optimism hit a near 1- year low in August and a regional manufacturing gauge grew more slowly than expected, data showed on Monday, after Japan reported growth slowing to a crawl in the second quarter.
The Singapore Mercantile Exchange said it will open for trading in gold, oil and euro-dollar futures on August 31. The first phase of product launches will include a Gold Futures Contract with physical delivery, West Texas Intermediate crude, Brent-Euro crude and euro-dollar futures contracts, amongst others.