Gold rebounds more than 1 percent after sell-off

Gold prices rebounded more than 1 percent on Thursday following a drop of 3 percent in the previous session, as sharply lower prices attracted bargain hunters, but improved risk appetite is likely to cap gains.

Spot gold rose as much as 1.5 percent to $1,842.89 an ounce after its most volatile day in two weeks, with a trading band of more than $80. It stood at $1,840.04 by 0152 GMT.

The most-active U.S. gold futures contract rose 1.6 percent to $1,846.6, before easing to $1,843.90.

"Some investors, speculators and physical buyers have shown a lot of buying interest at current prices, as they are much lower compared to a few days ago," said a dealer at a Tokyo-based bullion house.

Spot gold hit a record high of $1,920.3 on Tuesday.

The faith in gold's long-term bullish trend remained intact as concerns about global growth still run high, although the short term is likely to remain choppy.

"Concerns about economic growth in the United States and euro zone will keep supporting gold prices. Even though we may see liquidation repeatedly along the way, gold will rise toward $2,000," the dealer said.

Gold fell below $1,800 in the previous session, after risk appetite surged and investors abandoned the precious metal for the stock market, as Germany's top court rejected lawsuits aimed at blocking German participation in emergency loan packages, but gave its parliament more say in bailouts.

Adding to the risk appetite, Germany's industrial output jumped unexpectedly in July, offering hopes that Europe's largest economy may avoid recession.

The sharp price drop triggered a flood of buying on Asia's physical market, dealers said.

Investors will be watching a speech by U.S. President Barack Obama on job creation to Congress, after data showed the economy added no new jobs in August.

Holdings of SPDR Gold Trust and iShares Silver Trust remained unchanged.

Sources : http://www.reuters.com/article/2011/09/08/us-markets-precious-idUSTRE78401J20110908