Gold hit one-week lows on Thursday as the dollar recovered from its recent plunge against the euro and dealers said further losses were possible.

There was talk of sales by European central banks and the physical market saw investors cashing in their holdings on concern that bullion could slide further to $720 and then to $700 an ounce, a level last seen in early September.

Spot gold hit an intraday low of $723.60 an ounce before rebounding to $727.20/727.90 by 0957 GMT, still down from $729.70/730.50 late in New York on Wednesday.

“Precious metals have corrected from recent highs over the past few days as over-long positioning and a firmer U.S. dollar have weighed on gold and platinum,” said John Reade, head of metals strategy at UBS Investment Bank.

“Further near-term downside seems likely but signs of gold jewellery demand, light now but likely to improve, make us think that this is merely a correction rather than the start of a rout,” he said.

Gold has fallen more than 3 percent since spiking to $747.65 on Monday, the highest since January 1980, but bullion investors remained upbeat due to firm oil, tensions in the Middle East, demand through exchange-traded funds and the U.S. Federal Reserve’s recent surprise move to cut interest rates.

The dollar stayed off record lows against the euro, with major currencies trading within narrow ranges ahead of key interest rate decisions from the Bank of England and the European Central Bank.

Gold often moves in the opposite direction of the dollar.

“We still feel that gold could possibly face a nasty correction if the dollar continues to strengthen, particularly if it makes a rapid move,” Investec Australia said.

“However in the medium to long term, we are bullish on gold and expect the metal to possibly even set new highs above $750 as safe-haven buying and strong investor interest continue to put upward pressure on prices,” it said in a daily report.

 

Investors await Friday’s payrolls report, which may shed further light on the health of the U.S. economy.

In other bullion markets, the most active August 2008 gold contract in Tokyo ended 16 yen per gram lower at 2,748 yen. It had reached a 22-year high of 2,804 yen on Tuesday.

COMEX futures fell, with the most active December contract down $2.3 an ounce at $733.30 from the New York settlement. On Monday it hit a 28-year high of $755.70.

The gold market did not react to news that around 1,500 miners remained trapped more than a mile underground in a South African gold mine owned by Harmony Gold on Thursday after an all-night rescue mission.

In physical markets, gold imports by India, the world’s largest consumer, were expected to hit a record above 800 tonnes this year on rising incomes from a booming economy and stronger local currency.

Platinum fell to $1,350/1,355 from $1,353.50/1,360.50 an ounce in New York, but off Thursday’s one-week low of $1,340.

Platinum has fallen more than 2 percent since rallying to $1,391 an ounce on Monday, within sight of last November’s record-high of $1,395. Speculative buying had pushed up platinum as it caught up with gold’s rally, dealers said.

Silver fell to $13.21/13.26 from $13.29/13.34 an ounce in New York, but palladium rose to $357/362 from $355.55/359.55.