Gold's Uptick Stutters as Investors Review Asset Positions

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Safe-haven demand lifted gold back to nearly $800. But profit-taking emerged after seeing the market run out of steam as the market focused more closely on the financial problem," said Tatsuo Kageyama, analyst at Kanetsu Asset Management in Tokyo.

Gold dropped 1.5 percent on Tuesday as investors viewed bullion as a risky asset, preferring to lock in their positions to raise cash amid deepening financial turmoil after the implosion of Lehman Brothers.

Though gold normally gains on safe-haven buying during financial crises because its value is not tied to fiat money, portfolio managers were keen to shed positions in commodities after Lehman's bankruptcy, the takeover of Merrill Lynch, and fears major insurer American International Group needed to raise additional capital. As of 0450 GMT, spot gold fell 1.5 percent, or $11.90, to $774.30 an ounce from Monday's nominal close in New York.

"Safe-haven demand lifted gold back to nearly $800. But profit-taking emerged after seeing the market run out of steam as the market focused more closely on the financial problem," said Tatsuo Kageyama, analyst at Kanetsu Asset Management in Tokyo.

"Investors want to hold cash or bonds. Gold was bought initially, but basically many investors treat gold and other commodities as risky assets."

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