LONDON (Reuters) - Gold steadied on Monday above a two-week low, but investors were nervous about taking new positions following recent losses in bullion and global equities markets.
Traders said weaker share prices had forced investors to lighten positions in risky assets, including commodities, until the situation in stock markets stabilized.
"The weakness in global stock markets on concerns of a credit crunch continues and this is probably a negative factor for gold," Dresdner Kleinwort said in a research note.
"Rising crude oil prices failed to provide support for gold last Friday, and might again be overruled by investors shunning risky assets and flying to the safe havens of government bonds."
Spot gold was quoted at $662.00/662.00 an ounce by 0949 GMT, against $661.40/662.20 in New York on Friday, after it fell as far as $656.90 -- the lowest since July 9.
Traditionally gold is seen as protection against economic and political uncertainty, but in recent months stock market losses have triggered a sell-off in precious metals.
"There are two types of investors in the gold market: there are investors who buy gold as a safe-haven asset and stick with it for years, and there are the second type of investors who react on news flows and macro-economic data," said Michael Widmer, analyst at Calyon Corporate and Investment Bank.
"I don't think they buy gold as a safe-haven asset. They move in and out of the gold market as their view on the fundamentals drivers changes," Widmer said, adding he was still not bullish on gold and any substantial price rise might not come through until the fourth quarter.
Dealers kept an eye on the dollar, which slipped modestly against a basket of major currencies, giving back some of last week's gains as investors geared up for a barrage of economic data and potentially more credit-driven market volatility.
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