Gold hit a four-week low on Monday, extending a sell-off into a fourth straight session as technical signals deteriorated and investors fretted that the Federal Reserve would raise US interest rates this year. The metal failed to benefit from a fall in the dollar after downbeat Chinese factory surveys lent support to safe-haven currencies such as the yen.
Spot gold fell to $1,133.65 an ounce, its lowest since October 5 in earlier trade, and was down 0.7 percent at $1,134.31 by 1446 GMT. It fell nearly 2 percent last week, its worst weekly performance in nine weeks. Gold had rallied last month on speculation that the softness in the global economy could prompt the Fed to delay raising rates until next year. But the US central bank's hawkish tone last week triggered a fresh sell-off in bullion.
Higher interest rates would weigh on gold because they lift the opportunity cost of holding the non-yielding asset. "The fact that the Fed is prepared to raise rates even when inflation is quite low is bearish to gold in the short term," Macquarie analyst Matthew Turner said. Investors awaited US manufacturing data, due at 1500 GMT, ahead of key non-farm payrolls numbers on Friday.
"For gold the focus will be very much on the US data, which should give a clearer picture on the state of the economy," Danske Bank senior analyst Jens Pedersen said. Technical selling sent prices lower, analysts said. Gold is expected to test support at $1,131, a break below which could cause a loss towards the next support at $1,119, said Reuters technicals analyst Wang Tao.
Liquidation of long positions was also weighing. "Gold probably needs moderately better emerging market import demand if it is to sustain a rally. In the near term the market also needs a respite from investor liquidations if prices are to stabilise," HSBC said in a note. Asian gold demand saw some improvement towards the end of last week, as lower prices attracted buyers. But local premiums remained largely unmoved, a sign that demand has not picked up in a significant way, dealers said.
Physical demand outside of Asia also remained soft. US Mint American Eagle gold coin sales slumped 73 percent in October. Holdings in SPDR Gold Trust, the top gold-backed exchange-traded fund, fell 0.3 percent to 692.26 tonnes on Friday. Data on Friday showed that speculators trimmed a bullish bet in gold from an 8-1/2-month high in the week ended October 27. In other precious metals, platinum fell 1.5 percent to $966.99 an ounce and palladium dropped to a one-month low of $649.75 an ounce. Silver was down 1 percent at $15.35.
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