Gold tumbled to a three-month low and platinum fell to its lowest level in more than five months on Wednesday as fears of rising inflation eased, traders said. Weaker oil prices and a firmer dollar prompted many investors to abandon trading positions, they added.
Other precious metals also declined, with palladium falling to its lowest level in more than three months and silver slipping to a two-week low. "Sliding oil prices and the perceived reduction in inflation look set to keep gold under pressure in the short term," said James Moore, precious metals analyst at TheBullionDesk.com.
"We have seen liquidations by funds and investors and I think we have got a little bit further to go and might see a dip back to the $542 area. "But from there, we will again form a base and bounce back," he added.
Spot gold fell as low as $561.60 an ounce, the lowest since June 20, and was quoted at $564.30/565.30 an ounce by 1531 GMT, compared with $576.50/577.50 in New York late on Tuesday. Gold has fallen about 23 percent since hitting a 26-year high of $730 in May, when investors diversified into metals. Weaker oil was the main driver behind the recent sell-off.
Oil fell to an eight-month low below $58 a barrel as a surprise build in US crude stocks offset Kuwait's announcement that it may join other Opec countries in cutting output if prices fall further.
"I wouldn't be too bullish at the moment. (Gold) prices can easily go down further from where we are, but ultimately I do think that, as we go through the quarter, prices should go back up again," said Michael Widmer, analyst at Calyon Corporate and Investment Bank.
"At the moment, sentiment is not very positive. Technicals are also not looking good either," he added. A fall in oil prices lower gold's appeal as a hedge against inflation. The metal also often moves in the opposite direction to the US currency. The dollar climbed across the board, brushing off a weak survey on the US jobs market, as a tumble in oil prices reassured investors the US economy may not slow as much as first thought.
PHYSICAL DEMAND: Dealers said current prices would attract investors and physical buyers in key consuming countries. "There's, of course, bargain hunting. From today, I would probably be a buyer because we've had quite a steep fall. The market may be trying to find a bit of support," a metals dealer in Singapore said.
Dealers said festival demand in main consumers in Asia might offer some support. Demand in India, the world's largest gold consumer, picked up, supported by lower prices and strong festival demand. In other metals, platinum fell to $1,083/1,088 an ounce, compared with $1,118/1,123 in the US market on Tuesday.
Silver hit a low of $10.50 an ounce and was later quoted at $10.64/10.71, down from $10.93/11.00. Palladium was at $292/297 an ounce, down from $300/305 late in New York.
In industry news, Polyus Gold, Russia's largest gold miner, will launch a $1 billion buyback of 9 percent of its stock on Wednesday at $58 per share, a company affiliate said, ahead of a planned London listing.
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