The key Tokyo gold futures contract slipped to a 3-1/2-month low on Thursday as selling gained momentum after it breached key support with supportive factors lacking.
The benchmark most-distant August gold contract on the Tokyo Commodity Exchange finished down 68 yen per gram or about 3.1 percent at 2,148 yen, a touch above the day's trough of 2,143, which was the lowest level since June 21.
On Thursday's peak was 2,181 yen pegged this week as a key support level. "The next support would be around 2,079 yen, the low marked in June," a Tokyo broker said.
Other TOCOM gold contracts fell by 63-71 yen. The key contract fell for the third day in a row and has lost about 7.5 percent since the beginning of the week.
The broker anticipated further declines in TOCOM gold on Friday, ahead of a three-day weekend in Japan. The Tokyo market will be closed on Monday for a national holiday.
Gold futures fell 2.5 percent in New York on Wednesday on selling by hedge funds, and traders braced for further declines. Spot gold fell to $563.00/$563.75 an ounce by TOCOM's closing bell, compared with $566.00/$567.00 last quoted in New York.
Sentiment was bearish as weakness in oil prices reduced the metal's appeal as a hedge against inflation, prompting investment funds to shift into bullish equities.
Traders continued to see oil prices playing a major role in setting the direction for gold. Bargain hunting, which emerged after a near 8 percent decline over the past week, later ran out of steam.
Total gold turnover on TOCOM was estimated at heavy 168,431 lots, many times higher than the 14,596 lots on Wednesday, when gold fell by the 60-yen daily limit. Elsewhere, most TOCOM platinum contracts closed down by the 150-yen daily limit with the exception of the prompt October contract, which briefly tumbled by a steeper 158 yen.
Platinum, which tracked the decline in New York Comex on Wednesday, when it closed at its lowest price in almost six months, is used mainly for jewellery and as an auto catalyst to clean car exhaust fumes.
Benchmark August platinum futures closed down 150 yen at 3,981 yen. Spot platinum was at $1,072/$1,077, compared with late New York levels of $1,075/$1,080 an ounce.
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