Prices in this southern Chinese city, one of the world's leading gold markets, closed at 494.00-494.50 US dollars an ounce Wednesday, down from Tuesday's finish of 499.20-499.70 dollars.

Gold managed to push through the psychologically important 500-dollar barrier on Tuesday, levels not seen since December 1987.

The main reason given for gold's gains, apart from increased physical demand in India, the world's largest jewellery market, and industrial demand, has been as a hedge against inflation sparked by soaring oil prices.

Gold has traditionally played this safe-haven role on inflation, along with offering security during times of economic and political distress, but dealers concede it is hard to see that these really have a role in the current rally.

Inflation too, remains relatively well contained and in recent months, as oil has slipped back from record highs seen in August, the pressure on that front has also eased.