Gold prices fell 3.7 percent to a one-month low on Thursday as the metal's decline accelerated because of a rise in the dollar and technical selling. Other precious metals followed, with platinum declining to its lowest in three weeks and silver tumbling by more than eight percent before partially recovering.
Gold fell to $620.90 an ounce, the lowest since April 25, before moving to $627.50/628.30 by 1439 GMT, against $644.40/645.20 in New York late on Wednesday, when it slipped about two percent.
"In sessions ahead, it's very likely that we can see further weakness, possibly tests towards $600 an ounce," said Yingxi Yu, precious metals analyst at Barclays Capital.
"(But) we are still maintaining our positive views on the medium to long-term basis because the macro-economic environment should be positive," she said, referring to a bearish dollar outlook in the long run and worries about inflation and US economic growth. The metal has fallen more than $100, or 15 percent, since hitting a 26-year high of $730 about three weeks ago. Its all-time high was $850 in January 1980.
"Gold is potentially going to correct lower still. If we go back to $620, then it probably could even go as low as $585," said James Moore, precious metals analyst at TheBullionDesk.com. "Overall gold still looks very positive and I think we have got further upside to do later in the year." Gold's fall dulled mining stocks, prompting declines in shares of Australia's top two gold producers, Newcrest Mining Ltd and Lihir Gold Ltd.
Britain's biggest shares slipped. Miners were the weakest sector, with Anglo American and Antofagasta down about 3 percent each, followed by drops of more than 2 percent each for BHP Billiton and Rio Tinto.
Industrial metals headed lower in another of the cross-asset sell-offs that are becoming more frequent. Copper and zinc dropped by more than five percent on the London Metal Exchange.
"With an absence of strong physical demand, sidelined investors and a seemingly range-bound US dollar, we see no immediate trigger for near-term metal price gains," said John Reade, precious metals analyst at UBS Investment Bank. "We do not believe that we have seen the highs in precious metals and expect higher metal prices - either later this year or into 2007."
Gold came under pressure due to soft oil, which fell below $71 a barrel after the United States said it was willing to join European countries in talks with Iran and Opec ministers said the oil cartel would probably hold supply near maximum rates.
Ian Cockerill, chief executive of South Africa's Gold Fields, said on Wednesday the gold price may hit $1,000 over the next few years, partly fuelled by hefty investment demand from oil producers with excess cash.
In other precious metals, silver dropped to $11.60 an ounce before edging to $12.03/12.13, against $12.53/12.51, while palladium fell to $335/340 from $348/353 in New York. Platinum fell as low as $1,216 an ounce before edging to $1,219/1,227, against $1,246/1,251 in New York. It had surged to a record high of $1,336 last month.
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