Gold at one-month low as investors shun commodities

By Anna Ringstrom

LONDON (Reuters) - Gold fell sharply on Thursday as investors took profits on a rally earlier this week that took prices to a record above $1,000 an ounce but analysts said bullion still held long-term appeal.

The flagship precious metal, widely seen as a safe haven asset as well as a hedge against inflation, peaked on Monday at $1,030.80, up 23 percent since the start of the year.

But on Thursday spot gold fell as much as 4 percent to a one-month low as investors sought cash to cover margins and losses in other markets.

It bottomed at $904.65 -- a level last seen on February 18 -- versus $944.20/945.00 late in New York on Wednesday, before paring some losses to trade at $921.90/922.80 at 1600 GMT.

Commodities have stumbled across the board for two days, with gold diving 6 percent on Wednesday in a dash for cash which analysts said was sparked by a smaller-than-expected U.S. rate cut on Tuesday.

"There has been a lot of long liquidation, I think primarily driven by the flee to cash to cover other losses ... especially in equities and currencies," said Daniel Hynes, metals analyst at Merrill Lynch.

Dan Smith, analyst at Standard Chartered, said he saw some support for the market at $900 an ounce and then again at $850, adding that trading could be "pretty rocky" in the near future.

"We are looking for the dollar to strengthen short term which will keep gold in check for the time being," he said.