Price stabilises at $1700 as jewellers enjoy $100 per ounce discount.
Jewellers rushed to buy gold on Wednesday after the price of the precious metal fell by almost $100 in the day.
In markets where gold physically changes hands, such as India and other parts of Asia, jewellers, traders and investors leapt at the surprise buying opportunity. "It’s been a long time since we saw such decent buying," one Hong Kong-based dealer told Reuters news agency.
The buying spree built a floor under the price, which stabilised on Thursday at around $1700 per ounce, down by around 5% from the $1800 price at the start of the week.
Financial analysts attributed the price drop to comments made by US Federal Reserve chairman Ben Bernanke, who gave no hints that the institution would embark on a third round of quantitative easing. Previous cash injections from the Fed have been seen as responsible for supporting high gold prices over the past year.
Physical demand for bullion was unable to support prices once investor sentiment turned. A report from investment bank UBS said that physical demand has been virtually non-existent in recent weeks with the gold price at $1800. It also suggests that future gold price movement is going to be driven more by people buying real gold than speculators buying paper.
"What the physical community do from here is hugely important," the UBS note said.