Gold fell sharply for a second straight session on Friday, hitting its lowest in a month, as Greece's debt worries boosted the dollar and pressured equity and commodity markets. Technical selling accelerated the losses. Bullion prices broke below the 50-day moving average, a key support level, and fell beneath a consolidation range roughly between $1,505 and $1,555 that had held since late May.
Gold was set to fall 2 percent for the week, its largest weekly decline since the first week of May when the commodities fell sharply across the board. "You have prices of crude oil, commodities and the stock market again under pressure. And you have a strong dollar. To think that gold is going to rally, it's just not going to happen," said independent investor Dennis Gartman. "Every market that has the term 'risk' associated with it, everybody wants out," he said.
Spot gold was down 0.8 percent at $1,508.30 an ounce by 10:58 am EDT (1458 GMT), having earlier hit a one-month low at $1,504.91. Bullion was poised for its biggest two-day loss in nearly two months. US August gold futures fell $12.10 to $1,508.30. Silver was down around 1.6 percent at $34.68 an ounce, lifting the gold/silver ratio - the number of ounces of silver needed to buy one ounce of gold - close to 44, near its highest in a month. The ratio's increase highlights gold's outperformance relative to silver.
Crude oil and equity markets also slid for a second day, even as data showed new orders for US manufactured goods and a gauge of business spending plans rose in May. But, earlier this week, the Federal Reserve cut its forecasts for US growth, without signalling an additional policy measures, such as quantitative easing, to stimulate US economic growth.
Gold has thrived on the expectation of an extended period of low US interest rates, which also depressed the dollar against other currencies, placing non-yielding bullion in a better position to compete for investor cash against stocks or bonds. "We still are in very uncertain times. And, it's likely to continue until we see greater signs of economic growth globally, particularly in the United States, and we start to see the European debt situation ease," said Darren Heathcote, head of trading at Investec Australia.
Bullion investors will pay close attention to news regarding discussions over the US debt limit after budget talks collapsed on Thursday. Republican negotiators walked out of the meeting, casting doubt on Washington's ability to reach a deal that would allow the government to keep borrowing and avoid a debt default.