Gold fell around 1.5 percent on Thursday as investors sold the precious metal to cover sharp losses in other commodity markets, and selling accelerated after gold broke below technical support, on track for its biggest two-day loss in nearly two months.
The metal touched a two-week low during the session, as commodity investors sold bullion to cover sharp losses led by crude oil, industrial metals and grains against the backdrop of economic uncertainty in Europe. Selling in gold, a traditional safe haven that has recently performed more like a riskier asset, accelerated after the metal broke below support from a three-week upward trendline. The metal has lost around 3 percent in the past 4 sessions.
"On Wednesday, gold closed below its 10-day moving average for the first time in about a month. It's very likely we could have more weakness in the next few days," said Erik Gebhard, principal of futures broker Altawest. Spot gold was down 1.4 percent to $1,737.89 an ounce by 12:01 p.m. EST (1701 GMT). It hit a session low of $1,733.74 an ounce, the cheapest price in two weeks. US December gold futures were down $35.20 at $1,739.10 an ounce. Futures volume was in line to exceed its 30-day norm for a second consecutive day, bucking a recent slow trading pace.
Spot silver fell 3.7 percent to $32.45 an ounce. Investors liquidated positions in gold as a broad range of commodities slid. The outlook for raw materials demand dimmed as economic fears lifted borrowing costs in the eurozone. "The debate in Europe regarding the availability or non-availability of the ECB to expand its balance sheet and monetise European sovereign debts is at the core of gold's longer-term strength," said Dennis Gartman, veteran trader and a market commentator.
Demand for gold rose by 6 percent to a 1-1/4 year high in the third quarter of 2011, driven by central bank purchases and European demand for bullion against the backdrop of the escalating euro crisis, according to a report by the World Gold Council. After a 20 percent slump in the third quarter from the previous one, gold imports to India, the world's biggest consumer of bullion, are likely to recover in the last quarter of 2011, the report said.
Holdings of the largest gold-backed exchange-traded-fund (ETF), New York's SPDR Gold Trust climbed 0.72 percent from Tuesday to Wednesday, while that of the largest silver-backed ETF, New York's iShares Silver Trust remained unchanged for the same period. Among platinum group metals, platinum fell 1.3 percent to $1,590.99 an ounce and palladium fell 3.5 percent to $622 an ounce.
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