Gold extended losses on Wednesday, continuing its biggest three-day slide since mid-November, after surprisingly strong US jobs data buoyed the dollar and encouraged investors to buy into riskier assets. Spot gold was bid at $1,369.80 an ounce at 1539 GMT, against $1,379.73 late in New York on Tuesday.
Earlier it fell more than 1 percent to session lows at $1,363.80, a day after having posted its largest one-day loss since November 12. US February gold futures fell $7.40 to $1,371.40. The precious metal came under heavy pressure, along with other commodities, as the dollar rose more than 1 percent against the euro after ADP Employer Services data showed strong growth in private sector jobs.
Strength in the dollar curbs gold's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies. But gold still looks likely to be firmly underpinned by factors such as concerns over sovereign risk, threats to US economic stability and the prospect of rising inflation in the fast-growing developing world, analysts said.
"I don't think this marks a turnaround from what has been and continues to be bullish sentiment towards gold and hard assets in general," said Credit Agricole analyst Robin Bhar. Commodities slipped almost across the board as the dollar rose, with oil prices down from their highest in nearly two years and copper dropping from record highs. "The big risk for gold, from my perspective, (is that) some of the major hedge funds, which are long in physical gold or ETFs, start to take profits," said Peter Fertig, a consultant for Quantitative Commodity Research.
Reflecting waning investor appetite for gold, holdings of the world's largest gold exchange traded fund, the SPDR Gold Trust, fell to a seven-month low, reversing most of the inflows that followed the eurozone debt crisis. Silver fell for a third consecutive session, under pressure from the strength in the dollar and a decline in other growth-linked assets such as base metals.
The ratio fell by a third to multi-year lows in 2010 as silver outperformed gold with an 84 percent price rise. Spot silver was last down by 2.7 percent at $28.96 an ounce. Weaker equity markets also undermined the platinum group metals, which through their exposure to the auto market tend to react in tandem with other cyclical assets. Spot platinum fell to a one-week low at $1,701.40 before recovering to $1,709.90, still down 2.5 percent on the day, while palladium fell by 2.6 percent to $754.98.