LONDON, Feb 14: Gold dropped to a five-week low on Tuesday on selling by speculative traders and fund managers but rebounded in Europe as the dip attracted fresh buyers.

Platinum skidded below $1,000 on the back of liquidation in Japanese futures, to recover later. Palladium saw scattered demand from Chinese jewellers.

Gold has fallen 7 per cent from its 25-year peak of $574.60 an ounce some two weeks ago when fund buying intensified due to tensions in the Middle East over Iran’s nuclear ambitions.

This is the attitude of many players in the market and if enough players think like that, it simply becomes fulfilling.

Spot gold fell as low as $534.50 an ounce, its lowest since Jan. 6, before bouncing back to $540.00/540.75, against $538.60/539.50 late in New York on Monday.

The correction looks set to continue over the course of the week, offering not only physical players but investors a good buying opportunity before marching on to the $600 level later in the year, said James Moore, analyst at TheBullionDesk.com.

In Japan, selling overnight dragged down Tokyo futures to a four-week low. The key contract fell by the daily price limit of 60 yen per gram for the second straight day.

Dealers said mounting expectations that the US Federal Reserve would keep raising interest rates after 14 straight rises to 4.5 per cent had triggered liquidation by funds and speculators, as gold could become less attractive.

Soft oil prices also dampened the sentiment. Gold is often seen as a hedge against inflation.

Oil prices extended a two-week retreat to below $61 a barrel as an anticipated build in healthy US oil inventories eclipsed worries about Iran’s resumption of its nuclear programme.

In other markets, base metals were seen ranging after the previous day’s liquidation when copper saw futures falling to $4,745 a ton, the lowest since Jan. 25, and over 7 per cent down from last week’s record peak of $5,100.

Platinum fell to its lowest since Jan. 9 at $995 an ounce. It later rebounded to $1,007/1,011, still down from $1,012/1,016 in New York.—Reuters