SINGAPORE: Gold was struggling below $1,200 an ounce on Friday and looked set to post its worst week in seven, while silver tumbled to its lowest since early 2010, as strong US economic data and fears of an early rate hike curbed the metals' appeal.
Gold and silver were hit hard after data on Thursday showed that US gross domestic product came in at a higher-than-expected annual pace of 3.5 percent.
The metals were already facing some heat after the US Federal Reserve earlier in the week largely dismissed financial market volatility, a slowdown in Europe and a weak inflation outlook as factors that might undercut progress towards its unemployment and inflation goals.
The hawkish comments and the strong economic data dulled gold's appeal as a hedge, as equities and dollar firmed up.
"The strong GDP data combined with the Fed's hawkish stance has put a stop to gold's recent rally," said a Hong Kong-based precious metals trader. "People are looking to reduce the size of their bet now as $1,180 is likely to be the next target."
Spot gold was little changed at $1,198.35 an ounce by 0325 GMT. The metal fell 1 percent on Thursday, when it also touched its lowest since Oct. 6 at $1,195.70.
The metal is on track for a 2.6 percent drop this week, the biggest decline since the week ended Sept. 12.
Gold fell to a 15-month low of $1,183.46 earlier this month, but recovered on increasing fears over a global economic slowdown. It is now headed for a second straight monthly drop.
Silver fell to $16.28 on Friday - its lowest since early 2010. It fell nearly 4 percent in the previous session, and was poised for a fourth monthly drop in a row.
The $1,180-an-ounce level will be watched closely for gold as there is talk of large-scale stop loss orders sitting beneath that level, MKS Group said in a note on Friday.
Reflecting bearish sentiment, SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.16 percent to 741.20 tonnes on Thursday, a six-year low.
Gold failed to get any support from the physical markets, a factor that could likely push gold to further lows. Physical demand usually provides a floor to dropping prices.
Buyers in top consumer China failed to emerge despite the drop below $1,200.
Premiums on the Shanghai Gold Exchange - the main platform for physical trades in the country - slipped on Friday to less than $1 an ounce, occasionally even dropping to a discount against the global benchmark.
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