Gold fell on Wednesday, tracking equity markets' declines and euro's drop against the dollar as weak Chinese factory data and slowing US consumer spending growth prompted investors to sell the metal. Gold, which has recently followed riskier assets, came under pressure as the euro slumped to its lowest since early October on signs that the eurozone debt crisis was starting to threaten Germany and France, the region's biggest economies. S&P fell 1.5 percent.
"It's a typical risk-off trade. We still have macroeconomic concerns and losses across markets are correlated. A lot of people don't want to own anything but only in cash and dollars," said Michael Matousek, senior trader at US Global Investors Inc, which has $2.5 billion in assets.
Spot gold was down 0.1 percent to $1,698.19 an ounce by 12:54 pm EST (1754 GMT), sharply off an earlier low of having fallen to a low of $1,677.08. US gold futures for December delivery were down $3.60 at $1,698.80 an ounce. Volume was on track to exceed its 30-day norm for a fifth session, preliminary Reuters data showed, reversing a recent trend of weaker turnover.
Buying related to options' expiration lifted bullion prices in the previous session toward the key $1,700-an-ounce option strike price. But the metal, on Wednesday appeared to lack follow-through demand. Gold's technical outlook remained vulnerable as it was trading below its 100-day moving average, a key support, which it held for a month until a breach following Monday's 2.5 percent losses.
"If gold falls to the $1,600 level, I would not be surprised to see a good rebound there because investors with deep pockets will be stepping in," Matousek said. Holdings of gold in exchange-traded funds backed by physical metal have risen more than a million ounces in the last week, their largest weekly increase since early August.
Total holdings of metal at the major ETFs tracked by Reuters are up 2 million ounces in November, the heftiest inflow since July's 2.95-million ounce net rise. Silver fell 2 percent to $32.03 an ounce, alongside the entire commodities complex on dollar's gains. Weak manufacturing data from China, the world's largest user of raw materials and second-largest gold consumer, wracked crude oil the industrial commodities.
Also weighing on gold was reports showing growth in US consumer spending slowed in September, and that services sector in the eurozone contracted for a third straight month in November. Platinum fell 0.9 percent to $1,551.99 an ounce, while palladium dropped 2.4 percent to $587.47.