Gold fell nearly one percent on Monday as investors abandoned trading positions on weaker oil and a UN-brokered truce that went into effect to end five weeks of fighting in the Middle East.
Spot gold fell as low as $626.25 an ounce and was at $626.25/627.25 by 1006 GMT, compared with $632.20/633.20 late in New York on Friday. "I can see it drifting, maybe down towards $620.
Hopefully there should be some support around the $620s, if not then at around $615," a precious metals dealer in London said. "But I would be surprised if it actually gets down that far. I think people will buy the dips again," he added. The metal came under pressure because of oil prices, which slumped one percent after BP said it would keep half its Prudhoe Bay oilfield pumping while it carries out pipeline repairs.
Easing tensions in the Middle East also caused the downfall. Guns fell silent across southern Lebanon on Monday after the truce went into effect to end fighting between Israel and Hizbollah that killed more than 1,250 people and wounded thousands.
Diplomats expect the truce to be fragile - tens of thousands of Israeli troops remain in southern Lebanon, and they are not expected to withdraw fully until an international peacekeeping force arrives alongside Lebanese troops. Gold is often seen as a safe-haven investment in difficult times and a hedge against inflation.
"We continue to recommend that investors use the current weakness in gold as an opportunity to build medium-term longs," UBS Investment Bank said in a daily report.
Other precious metals also fell, while mining shares in Australia were mixed. Newcrest Mining Ltd added 0.6 percent, gold and copper miner Oxiana dropped 2.08 percent and Lihir Gold Ltd eased 1.03 percent.
"It's sort of breaking through the uptrend that was in place. I think that's a bit negative," said commodities analyst Tobin Gorey of Commonwealth Bank of Australia in Sydney. Gold has yo-yoed since climbing to its highest in two months of $676 an ounce on July 17 because of the worsening conflict between Israel and Hizbollah.
The metal fell to its lowest in more than three weeks around $601 a few days later.
In other metals, platinum fell to a two-week low at $1,227/1,232 an ounce from $1,240/1,245 in New York. Palladium declined to $316/321 from $317/322, while silver dropped to $11.74/11.82 an ounce from $11.87/11.95.