Gold fell to a seven-week low on Tuesday, extending the previous session's sharp pullback, as equities markets pared gains ahead of a policy statement by the Federal Reserve. Bullion was on track for its biggest two-day drop in a month after the S&P 500 stock index pared early gains as weaker-than-forecast US retail sales tempered expectations of a strong holiday sales season.
Gold has dropped as much as 6 percent in the past three sessions as doubts over a deal for European economic integration reached over the weekend triggered a technical breakdown. "So much damage has been done to the psychology of the market in the past week...that we think wholesale liquidation shall be the outcome," said veteran trader Dennis Gartman, a long-time gold bull who completely exited his gold position on Monday. "We can imagine gold trading back toward 1,075-1,125 euros or toward $1,475-$1,525 an ounce," he said.
Spot gold was down 0.2 percent at $1,662.29 an ounce by 11:41 a.m. EST (1641 GMT), a day after posting its biggest one-day drop in nearly three months. It touched a session low of $1,650.89 earlier, its lowest since Oct. 25. Silver edged up 0.1 percent at $31.32 an ounce. The Fed is expected to make a policy announcement at 2:15 p.m. (1915 GMT).
Investors will also watch for moves by the ratings agencies. On Monday, Moody's Investors Service said it intended to review ratings of all 27 members of the European Union in the first quarter of 2012 after EU leaders at a summit on Friday offered "few new measures" to resolve the region's debt crisis. Spot platinum rose 0.5 percent to $1,487.49 an ounce, a day after it hit a seven-week low of $1,476.23. Palladium eased 0.1 percent at $656.97 an ounce.