Gold showed promise throughout London trading and reached an intraday high above $975, but a second straight sell-off in New York that began around noon pushed the yellow metal into the red, finishing at $952.10/oz., down $10.60. Overnight, gold is little changed.

Platinum dropped about $30 in Hong Kong but gradually gained back some of what it lost yesterday, ending at $1047.00/oz., up $6. Overnight, platinum is trending slightly higher.

Silver followed a similar track to gold but the sell-off in New York was not as large and it finished the day almost where it started, closing at $13.73/oz., down 3 cents. Overnight, silver is little changed. (Click here for charts)

It was a volatile day for the precious metals, but big losses were only experienced by gold. The market has become more volatile after prices rose above the key $1000 level last week, and though factors encouraging risk aversion remain, investors are choosing to cash in on the high prices now rather than chase them higher. Traders said though light buying had aided prices, given talk of the global recession, some people may opt to sell gold to secure cash, causing the market to lack the momentum to push beyond $1000 in the near term.

Another factor contributing to gold’s three-day fall was that U.S. policy makers apparently convinced many investors that the economy will recover from the recession soon, which partially eroded the appeal of the precious metal as an alternative investment.

Federal Reserve Chairman Ben S. Bernanke told Congress the government doesn’t plan to nationalize banks. President Barack Obama told lawmakers last night that the recession offers a chance to solve some of the nation’s problems.

“People have been buying gold on economic Armageddon, so to see Obama and Bernanke paint a rosier picture, I’m not surprised to see gold come down a little bit,” said Matt Zeman, of LaSalle Futures Group in Chicago.

Investors have been buying gold this year as a store of value, driving the price up 9.3% and investment in the SPDR Gold Trust (NYSE:GLD) to a record 1,029 metric tons last week. Sales of 1-ounce American Eagle gold coins more than quadrupled to 92,000 in January, according to the U.S. Mint. Still, a decline in prices may be an opportunity to buy, some investors said.

“Those who’ve not yet bought gold as insurance against economic chaos have their opportunity to do so now and we would strongly urge that,” Dennis Gartman, an economist and editor of the Gartman Letter in Suffolk, Virginia, told his clients yesterday.

Source: Precious Metals Display Volatility