Gold prices dropped nearly 1 percent on Wednesday after an encouraging US private-sector jobs report and relative stability in the Middle East - despite protests in Egypt - diverted interest to higher-risk assets and away from bullion. Bullion extended initial losses after data showed US private employers added more jobs than expected in January, the 12th consecutive month that companies took on staff. The news dented safe-haven demand.
"The sell-off seemed to illustrate that people had lost faith in gold and could see much better places to invest," said Peter Hillyard, an analyst at ANZ Bank. Spot gold fell 0.8 percent to $1,329.40 an ounce by 1:08 pm EST (1808 GMT). US gold futures for April delivery fell $9.50 an ounce to $1,330.80.
Citi analysts said in a note that their gold price outlook is skewed to the downside with signs of the past three years' risk-trade dissipating and as confidence is seemingly restored in developed market economies. Concern over unrest in Egypt and the prospect that it could spread into the wider Middle East is continuing to put a floor on prices, though it is prompting little new buying, analysts said.
Supporters of President Hosni Mubarak threw petrol bombs, wielded sticks and charged on horses and camels as they fiercely attacked demonstrators in Cairo on Wednesday after the army told protesters to clear the streets. Silver dropped 0.9 percent to $28.23 an ounce.
Silver's failure to breach key support at its 55-day moving average suggests its recent rise was corrective and another leg down is likely, Citi said. A breach of key support at $26.38 an ounce opens the way for $25 and a possible test at the 200-day moving average, it said. Palladium touched its highest point in nearly a decade after upbeat car sales numbers. Most of the palladium supply is used in catalytic converters. Platinum lost 0.2 percent to $1,820.75 an ounce against $1,825. Palladium shed 1.2 percent to $809.50 after matching a price last hit in March 2001, $825.50.