LONDON, Nov 25: Gold fell 2 per cent in Europe on Tuesday as a firmer dollar and softer oil prices prompted profit taking after the previous session’s near six-week highs.

Spot gold was at $807.00/809.00 an ounce at 1056 GMT, down from $819.55 an ounce in New York late on Monday. Earlier it touched a session low of $801.80.

The precious metal posted its biggest two-day gain since early 2000 that session as the dollar tumbled, with risk aversion easing after the US government agreed to inject $20 billion to rescue Citigroup.

The rally in commodities and stocks which followed pulled gold in its wake, but as the dollar recovers a touch on Tuesday and oil prices slip after gaining 10 per cent in two days, the precious metal is easing.

We have seen some really strong gains over the last few days, BNP Paribas analyst Michael Widmer said.

Yesterday there were gains across most asset classes, as there was some relief over the news on Citigroup, and gold benefitted from that as well. So far this morning, we are seeing a bit of profit taking.” A recovery in the dollar versus the euro is prompting some of this selling, analysts said. Gold is often bought as an alternative asset to the US currency and tends to move in the opposite direction to it.

The dollar firmed more than half a percent against the single currency in early trade, off a two-week low it hit on Monday.

Other asset prices also gave up gains, weighing on gold.

Gold typically moves in line with crude prices, as it is often bought as a hedge against oil-led inflation.

But while gold is slipping for the moment, analysts are confident that with interest rates easing around the world and the economic outlook uncertain, the precious metal will continue to be supported.

Gold’s rally seems to be overextended and profit taking or slight reversal is necessary (for it) to continue its uptrend, Pradeep Unni at Richcomm Global Services said.

However, as long as it stays above $776, gold would be bullish, he added.

Among other precious metals, spot silver tracked gold lower to $10.33/10.41 an ounce, against $10.47 in New York late on Monday.

Spot platinum slipped to $845/865 an ounce from $856, while its sister metal palladium was little changed at $191/199 an ounce against $190.50.

—Reuters