Gold off one-week low; consolidation kicks in

By Daniel Magnowski

LONDON (Reuters) - Gold bounced from a one-week low on Friday after this week's climb to a record above $900 an ounce, but the market could consolidate before charging higher, fund managers and analysts said.

All eyes were on a U.S. Federal Reserve meeting on interest rates Jan. 29-30 after Chairman Ben Bernanke told a congressional committee more rate cuts might be required as the economic outlook worsened.

Spot gold hit an intraday low of just over $870 an ounce before rebounding to $879.90/880.60 at 1547 GMT, marginally up from $876.70/877.40 in New York, on bargain hunting. Gold dropped around 1 percent on Thursday on chart-based selling and falling oil.

"Gold is consolidating after touching recent highs," said Christoph Eibl, head of trading at Tiberius Asset Management, noting that there had been some investor selling of gold held in exchange-traded funds (ETFs).

"ETF investors ... are holders rather than traders, therefore the recent drop has some strength," he said.

The amount of gold held in New York-listed StreetTRACKS Gold Shares, the world's largest gold-backed ETF, hit a record on Jan. 15 but has since fallen by around 20 tonnes to 629.83 tonnes.

Gold, which roared to a record high of $914 an ounce on Monday, is expected to trade in a range of $870 to $900 an ounce, with movements in the currency, energy and stock markets likely to provide direction.

Gold's drop from the record high was partly driven by selling from investors and funds to cover margin calls from losses in stock markets amid fears of a recession in the United States.