Gold fell 2 percent in heavy volume on Tuesday after breaching a key support, as renewed concerns about Greece's debt triggered economic fears, while some analysts say the metal looks oversold and poised for a rebound. Silver fell 3 percent, and platinum and palladium headed for their largest one-day falls this year after caution grew about global economic outlook a day after China cut its growth forecast and data showed the European Union is unlikely to avoid a recession.
Bullion broke below its 200-day moving average for the first time since mid-January, tracking US equities' slide on worries Greece could miss a deadline to complete a deal swap to avert a chaotic default. Gold investor sentiment was already cautious after a sudden 5 percent drop last Wednesday as investors fretted over no imminent US quantitative easing.
The metal appeared to find it footing after it rebounded near $1,660 an ounce, an area of support from its previous tumble in January. "People who are long gold are getting out. They don't like what's going on with Greece and the stock market is decisively lower. It's a matter of raising money," said Jonathan Jossen, COMEX gold options floor trader.
"But the bullish option flow usually tells me we could be near a bottom," Jossen said. Spot gold was down 1.9 percent at $1,673.19 an ounce by 11:08 am EST (1608 GMT), having earlier hit a six-week low of $1,663.95.
US gold futures for April delivery fell $29.70 to $1,674.20. Trading volume was very heavy, with more than 20,000 lots of the April contract changed hands within the first 10 minutes when the US stock market opened. "It's long liquidation. Everyone is trying to get out of the door at the same time," said Afshin Nabavi, head of trading at MKS Finance.
Gold's losses accelerated after the metal broke its 200-day moving average (DMA) at $1,676 an ounce. Silver also sold off in gold's wake, down 3.3 percent at $32.83 an ounce. Gold is extending losses after falling nearly 4 percent last week, the most since mid-December, after US Federal Reserve Chairman Ben Bernanke disappointed financial markets when he failed to signal another imminent round of monetary easing.
The metal was up 7 percent for the year on a boost after the Fed said in January it would keep interest rates near zero until at least late 2014. Gold investors will closely watch a policy statement from the Fed Open Market Committee next Tuesday. Also weighing on physical gold sentiment was data showing gold imports into China from Hong Kong dipped 15 percent in January from the previous month, reflecting slower sales during the Lunar New Year holiday. Spot platinum was down 2.6 percent at $1,616.49 an ounce, off a low of $1,598.70, while spot palladium was down 3.5 percent at $678.22 an ounce.
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