Gold fell in a volatile session early on Thursday after comments by European Central Bank (ECB) President Mario Draghi ignited renewed economic fears over the eurozone. The metal fell in tandem with US equities and industrial commodities on recession worries after Draghi's comments triggered a nearly 1 percent drop in the euro against the dollar.
Draghi said that economic activity in the euro area should gradually recover later in 2013 but there are more negative risks than positive ones. Technical selling accelerated gold's losses after the metal failed to rise above its 55-day moving average, which gold has failed to close above since late October.
"It was up earlier but couldn't get through a resistance level," said COMEX gold options floor trader Jonathan Jossen. "There is no interest in gold." Spot gold fell 0.3 percent to $1,671.44 an ounce by 1:59 PM EST (1859 GMT), having earlier hit a session low of $1,662.80 an ounce. US gold futures for April delivery settled down $7.50 at $1,671.30 an ounce, with trading volume in line with its 250-day average, preliminary Reuters data showed.
Also denting sentiment was news that top Federal Reserve official Jeremy Stein, a member of the powerful Fed board of governors, said that an extended period of low interest rates could create risks to financial stability. Physical gold demand also began to weaken ahead of the long Lunar New Year break, with premiums for gold bars in Hong Kong falling from last week's high.
In fundamental news, China's gold production rose for a sixth consecutive year to hit a record 403 tonnes in 2012, keeping its ranking as the world's largest bullion producer, the Shanghai Securities News said on Thursday. Silver fell 1.1 percent to $31.46 an once. Platinum group metals, which are mostly used to make auto catalytic converters, fell broadly on Thursday.
The group had posted solid gains prior to this week's losses on a more positive economic outlook and after mining disruptions in South Africa, as well as a drop in supply from Russia. Analysts, however, say a short-term correction is likely, considering strong speculative interest. UBS analysts said in a note that any risk-off sentiment or negative economic data would easily trigger an overdue pullback given the heavy speculative net long positions.
Platinum was down 0.8 percent to $1,719.74 an ounce, retreating from a high of $1,740 on Wednesday, its strongest since September 2011. Palladium fell 1.2 percent to $751 an ounce. The metal rose as high as $769.50 in the previous session, also its peak since September 2011.
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