SINGAPORE, Oct 15: Gold gained more than 1 per cent on Wednesday after declines in stock markets and renewed fears the global economy could be tilting into recession prompted speculators to buy the metal as an alternative investment.

Platinum dropped more than 3 per cent as worries about demand resurfaced -- just one day after speculators and retail investors in Japan pushed up the price to its strongest in two weeks, above $1,000 an ounce.

Gold traded at $844.05 an ounce, up $8.80 from New York’s notional close. It jumped more than 2 per cent to a high of $853.50 on Tuesday, but trimmed gains after the United States unveiled plans to take stakes in its biggest banks.

Buying should ideally emerge on dips but gold would need to clear $870 to sustain the bullish trend. Technically as long as $823 holds the bulls are safe, but gains would be slow and steady, said analyst Pradeep Unni at Richcomm Global Services.

Gold, still below a record high of $1,030.80 hit in March, traded around $870 earlier this week and struck a two-month high of $931 last week before losing some of the gains to rallies in equities.

Volatile gold prices blunted buying appetite in India, the world’s largest consumer, ahead of Diwali, the Hindu festival of lights, at the end of October. Investors, who normally take profits when prices soar, were also on the sidelines.

They are waiting because they think the market will rise even further because of the global crisis. They think gold prices may touch $1,000, said Girish Choksi, a dealer based in the western gold-trading city of Ahmedabad.

The world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust , said its bullion holdings slipped on Oct. 14 by 3.06 tons to 767.58 tons, which suggested some investors booked profits from gold’s recent gains. In other markets, oil fell towards $78 on recession fears, which could potentially cap gains in gold.

It rallied to a two-week high of $1,040 on Tuesday, mainly due to buying from investors in Japan. A 5-pc decline in Tokyo platinum futures also ignited selling.

The problems in General Motor are not settled yet. That’s why platinum is not so strong, said Yukuji Sonoda, a precious metals analyst at Daiichi Commodities in Tokyo, adding that trading houses were also seen selling back platinum.

—Reuters