Gold little changed as economic outlook worsens

Gold was slightly changed on Tuesday after jumping 2 percent the previous day on China's economic stimulus plan, which had loosen up fears about demand and started a broad-based rally in commodities.

Some analysts said the news about China's $600 billion stimulus package, together with pledges by the Group of 20 nations to try to prevent a global recession, highlighted views that gold would stay underpinned around $700 in the near future.

But investors were apprehensive to buy further after the bad outlook for the global economy was underscored by a renewed sell-off in equities and news on Tuesday that China's annual consumer price inflation had fallen to a 17-month low.

Spot gold stood at $744.50 an ounce as of 0718 GMT, compared with the notional close in New York of $745.80 on Monday.

"The stock markets were hit again by risk aversion, and gold is now seen as risky," said Tatsuo Kageyama, an analyst at Kanetsu Asset Management Co in Tokyo.

Gold to cash

Selling gold for money has become quite normal, now that financial markets around the globe are highly vulnerable, he added.

Hedge fund managers could sell gold or commodity index funds including gold to acquire cash as the year-end nears, putting shadow over the yellow metal, he said.

Gold touched a high of $767.80 an ounce in New York on Monday after the huge government spending package announced by China on Sunday helped stop risk aversion and fuelled gains in oil, base metals and commodities across the sector.

"China is doing its own part... Governments have shared their needs and will to avert a recession. So, gold will probably stay somewhat underpinned for a month or two," said Naomi Suzuki, an analyst at SCM Securities in Tokyo.

She said gold is basically caught in a $700-800 range, although it may move away from its core range of $730-760 from time to time.

Tokyo's benchmark Nikkei share average fell 3 percent on Tuesday, while other Asian stock markets followed suit, tracking Wall Street shares lower as worries about the future of U.S. companies like General Motors rose.