Stabilising stock markets and the dollar’s rise over the past week after the U.S. government announced measures to clean toxic assets off banks’ balance sheets put a cap on gold prices, undermining the yellow metal’s appeal as a safe haven.

Still, uncertainties over the sustainability of a stock market rally and the dollar’s rise, as well as the global economic outlook, kept intact investor appetite, resulting in record holdings of gold-backed securities.

“The stock market is stabilising and investors are stopping their safe-haven buying of gold,” said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong. At the same time, there was nothing to justify selling of gold because it was not clear how the economy fares, he said.

Gold was at $921.05 per ounce by 0240 GMT, little changed from New York’s notional close of $922.10. Gold has held firmly above $900 thanks to buying related to gold-backed securities.

At current levels, gold is up about 5 percent on the quarter but 10.6 percent below an all-time high of $1,030.80 hit a year ago. Bullion has recovered about 4 percent from a six-week low of $882.90 hit on March 18, but is 8 percent off the 11-month high above $1,000 set in February.

It has been six months since the collapse of Lehman Brothers, which aggravated the financial crisis, and the global economy and financial system have yet to show a clear sign of a turnaround, traders said.

“Unless the economy really starts working and stock markets rally, and banks start lending and businesses revive, people will not jump out of the gold market,” Leung said.

Trading was subdued due to the month-end and as some players turned cautious ahead of U.S. nonfarm payrolls data due later in the week. There were not many expectations for a meeting later in the week of the G20 group of the world’s 20 biggest economies, traders said.

The world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust , said holdings rose 2.45 tonnes to a record 1,127.44 tonnes on March 29.

For details on the gold holdings of the ETF listed in New York and co-listed on other exchanges, click on: http://www.exchangetradedgold.com/iframes/usa.php

Tokyo shares fell 1.8 percent on Monday as investors locked in profits from last week’s sharp rally.

The dollar firmed after the euro posted its biggest one-day fall since early January on Friday.

Later on Monday, data on British consumer credit and mortgage lending for February and euro zone March business climate sentiment will be released.

Prices as of 0250 GMT Metal Last Change Pct chg YTD pct chg Turnover Spot Gold 921.65 -0.45 -0.05 4.72 Spot Silver 13.29 0.02 +0.15 17.40 Spot Platinum 1129.00 6.00 +0.53 21.14 Spot Palladium 215.50 -2.00 -0.92 16.80 TOCOM Gold 2926.00 -34.00 -1.15 13.72 13488 TOCOM Platinum 3585.00 -58.00 -1.59 35.18 7031 TOCOM Silver 416.40 -7.00 -1.65 30.41 221 TOCOM Palladium 690.00 -16.00 -2.27 25.45 291 Euro/Dollar 1.3269 Dollar/Yen 97.68

TOCOM prices in yen per gram, except TOCOM silver which is priced in yen per 10 grams. Spot prices in $ per ounce.

March 30 (Reuters)

Demand for physical gold is soaring so much that it is almost impossible to get hold of right now. And gold production is lower than in 2000. Andrew says all this means it will soon be gold’s time to shine…

More from Investor’s Daily Edge:

Gold dropped from $915 to $859 on Friday. That’s not supposed to happen while the market is crashing. What’s going on?

It’s not that gold has lost its luster. But institutional investors were forced to sell gold on Friday to meet margin calls.

If equity and hard assets continue to lose value anywhere near the rate of last week, margin liquidation will continue. And gold could go down even more.

But make no mistake about it. With the market crashing and dozens of governments printing money like there’s no tomorrow, investors want to be in gold.

Before the sell-off on Friday, the price of gold was up more than 20 percent following Lehman’s collapse.

The demand for physical gold this month has surged to what one trader calls “unprecedented” levels. The US Mint has doubled its gold-coin production but it hasn’t been enough.

Gold dealers have had to turn away customers wanting to buy coins and bars.

But it’s the physical demand (for jewelry) that ultimately decides the price of gold. Jewelry demand accounts for 60 percent of total gold demand and it’s down so far this year.

Will it pick up? The world’s biggest gold consumer is India and Diwali – the festival of lights –begins October 28th. Gold sales usually surge with the approach of this festival.

Then there’s this: Gold production today is lower than it was in 2000.

Gold is rarer than ever. The markets are going to hell. It’s gold’s time.

Source: Has Gold Lost its Luster?