Gold was trading at $729.20 an ounce, up $1.55 from New York's notional close on Wednesday on bargain hunting. It had hit an intraday low of $718.20 - its lowest level since September 2007.
"I am no gold bug, but I am not willing to give up on the yellow metal's extremely bullish longer-term prospects," said Jeffrey Nichols, managing director of American Precious Metals Advisors.
"Nevertheless, in the near term, gold remains vulnerable to the same forces that knocked the metal's price down from over $800 an ounce. It is easy to imagine, in the wink of an eye, gold at $700 or even less before the yellow metal begins to shine once again."
Bullion has dropped more than a fifth since rising to a two-month high at $931 on Oct. 10 as investors ditched gold for cash amid fears of a global recession - a move that also sent other precious metals to multi-year lows.
Gold, often viewed as a safe-haven in times of uncertainty, was well below a record high of $1,030.80 hit in March.
"Gold's fortune is very much driven by the U.S. dollar. Whilst gold, you might think, should benefit from a safe haven perspective, the downward pressures are dominating it at present," said Darren Heathcote of Investec Australia.
"Technically, there may well be support around $700 but given what's driving the market, it may or may not prove very strong. I think the major support now is probably going to come in somewhere around the $693 level," he said, referring to a level seen in September 2007.
The dollar index, which measures the U.S. currency's value against a basket of six currencies, edged up to 85.631 after hitting a two-year peak of 86.070 as concerns about a worsening global economy prompted investors to cut risky assets.
The Nikkei average fell over 7 percent to its lowest point in more than five years before trimming losses.
Declines in equities put pressure on gold as investors dumped the metal to pay margin calls.
Platinum hit a low of $781.00, its weakest since July 2004, as poor car sales and a slowing U.S. economy threatened to cut demand for autocatalysts.
"There's some selling by speculators in Tokyo, which puts pressure on platinum. It's hard to say where gold and platinum are heading. At this stage, anything can happen," said a dealer in Hong Kong.
The automotive sector, which accounts for around half of all platinum demand, has been hit hard by the prospect of recession. A spate of carmakers in the U.S., Europe and Asia have reported falling sales.
Author: Jo Amey
