Gold opened weaker in Asia on Tuesday after soaring overnight to fresh quarter century highs above $US540 an ounce on frantic buying by momentum-chasing speculative funds. Analysts say investors were keen to take profits ahead of Wednesday's anticipated interest rate rise by the US Federal Reserve.

Spot gold pulled all the way back to be at $US527.90 in early Sydney trade after hitting an overnight high at $US540.90, its highest since March, 1981. In New York, gold for February delivery advanced for an eighth session to end at $US531.50, up $1.30 on the day, but below the intraday peak of $544.50.

Other precious metals futures also rallied to new highs before profit-taking kicked in. Silver slipped from an 18-year peak, although platinum rose to almost a 26-year high and palladium briefly hit a 19-month peak atop $300 an ounce.

Analysts say with the speculative market gorged on gold - long positions have hit record highs since the climb through $US500 last month - a pullback was well overdue.

"There have been some meaty trends of late and speculators have piled into positions that they may now seek to unload," independent analyst Greg Weldon said in his Money Monitor report. Weldon added that it was increasingly probable that a liquidation of positions across many markets may begin to unfold before 2006.

Money managers and speculators have jumped into gold in recent weeks to diversify portfolios with stronger commodities markets amid more muted performances in currencies, equities and bonds.

Analysts say the possibility that some of the world's central banks are buying gold also has given sentiment a boost.

However, a steep and rapid correction could emerge soon as the net speculative long position on the New York futures market is near a record high and gold is deep into technically overbought territory.

"While our technical strategists are unwilling to call a high for gold they do note that the moves today have been particularly large and may be signalling a top in the market," said UBS analyst John Reade. "We have been surprised by the extent of the move and believe it is overdone."

"We recommend investors who are long gold use this opportunity to take profits, and while we are not brave enough to recommend investors get short, we strongly suspect that the next $40 in gold is down, rather than up," he said.

Commitments of Traders data from the Commodity Futures Trading Commission showed the net fund long exposure in COMEX gold futures rose to 167,413 contracts as of last Tuesday, 158,905 lots a week earlier.

Markets expect the Fed to raise its key rate for a 13th straight time to 4.25 percent at a policy meeting on Tuesday, but many punters are speculating that the central bank will tweak its language and signal a peak in the cost of borrowing.

The rise in US interest rates has been the main driver of the greenback's 18 per cent rise against the yen and 14 per cent gain against the euro this year.

What has changed in the past couple of months is that gold has been rallying alongside the strength in the US dollar. Normally, the two move in opposite directions.

Chartists put resistance in COMEX gold at $550 and then at $560, while support is viewed at $510, $500 and $497.

The all-time peak for futures, hit in January 1980, was $873.