By ALLEN SYKORA

Gold futures climbed nearly all the way back to steady levels as some of the risk aversion triggered by the U.S. government's case against Goldman Sachs Group Inc. eased, and jewelry fabricators used the recent price retreat as a bargain-hunting opportunity.

Bloomberg News

June gold, the contract month with the most open positions, fell $1.10, or 0.1%, to settle at $1,135.80 an ounce on the Comex division of the New York Mercantile Exchange. April, which has few open positions remaining but remains the nearby contract, fell $1.10, or 0.1%, to $1,135.20.

Most-active May silver, which fell overnight and then bounced with gold, managed to finish in positive territory by 5.6 cents, or 0.3%, at $17.731.

Gold initially extended Friday's slide overnight, with the June futures hitting a 1 1/2-week low of $1,124.30 an ounce, on "leftover sell orders and some fresh bailing-out instructions" left with trading desks, said Jon Nadler, senior metals analyst at Kitco Metals. The main catalyst continued to be Friday's news that the Securities and Exchange Commission charged Goldman Sachs with defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages.

This prompted a general shift out of so-called riskier assets ranging from equities to commodities such as gold, oil and base metals. But as the day wore on, some of these fears began to fade, said one New York trader, although not due to any specific breaking news.

"Most of the nervousness has dissipated and people are starting to come back into the markets," he said. "It's not just gold."

As gold closed, the Dow Jones Industrial Average was roughly where it left off on Friday.

Meanwhile, a couple of dealers reported that the overnight weakness in gold triggered some bargain-hunting.

"As we dipped under $1,130 and toward $1,125, we saw some significant [amounts of] physical metal bought, mostly coming out of India," said one trader. Much of this likely was for jewelry fabrication, he added.

Jewelry remains the No. 1 use for the metal, and there is often a tendency for this demand to slow when gold prices soar, and conversely to pick up on price pullbacks.

Gold futures also bounced from technical chart support, said Charles Nedoss, a senior market strategist with Olympus Futures. Specifically, the low in the June futures held right around the 100-day moving average, which is currently around $1,124.20. The contract fell below but got back above the 20-day average of $1,128.60.

Some of the recent pressure on gold may have come from a link between the Goldman case and hedge fund manager John Paulson, known to have large gold holdings, some traders said. According to the SEC complaint, Mr. Paulson paid Goldman $15 million to create mortgage-related securities that he wanted to bet against. However, Mr. Paulson wasn't charged in the SEC's case, with the SEC saying that he didn't mislead investors about anything.

Still, some investors might have been betting that Mr. Paulson's hedge funds may have to liquidate some gold holdings to meet redemptions, Mr. Nadler said. At the end of 2009, Mr. Paulson's company held 31.5 million shares in the SPDR Gold Shares trust, valued at $3.38 billion. For SPDR and other similar exchange-traded funds, gold is put into storage to back shares that trade like a stock but track the price of the commodity, minus fund expenses.

However, holdings in SPDR Gold Shares remained steady on Friday and in fact haven't changed since April 9. Also, one New York trader said he doubts the Paulson link is a major bearish factor for gold traders at the moment, or else the metal likely would have plunged far more than it has so far.

Meanwhile, July platinum settled up $1.30, or 0.1%, at $1,696.60 an ounce. June palladium rose $1.85, or 0.4%, to $533.70.

One trader said bargain-hunting emerged in both of these metals after their slide Friday and overnight. July platinum tumbled from a high as recently as Thursday of $1,738.60 an ounce to an overnight low of $1,675.

"The drop provided the ability for people, both on the industrial and speculative side, to pick it up at cheaper prices," said the trader.

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