The stark appreciation in US dollar killed the gold bulls as investors choose Dollar amid the Europe's sovereign-debt crisis. Gold also known as a safe asset got beaten very badly as the tumbling equities prompted investors to cash in to cover losses caused by the crisis in Europe.
COMEX December delivery futures are trading down $5 at $ 1694 an ounce on the New York Mercantile Exchange. Gold has been continuously facing resistance near $1800 and this week it broke below $1700 an ounce. The counter is now open for a fall near $1600 levels.
Gold reached a record $1,921.15 on Sept. 6 as investors sought to diversify away from equities and some currencies amid concerns that economic growth may slow. The metal fell to $1,667.03 on Nov. 21, the lowest price in almost four weeks.
The dollar climbed against most major peers, extending this week's gains, as investors sought the safest assets on concern economies in the euro area will worsen as leaders struggle to halt the region's debt crisis.
The euro dropped to a seven-week low against the greenback as Italy prepares to sell bills today after the country's two- year yield soared to a 14-year high yesterday. Australia's dollar was set for a fourth week of declines as Asian stocks fell after German Chancellor Angela Merkel's rejection of joint euro bonds damped optimism about a potential remedy for the region's woes. The dollar rose against the yen before a U.S. report next week forecast to show consumer confidence improved.
The 17-nation currency was set for a 1.6% drop against the greenback this week. The dollar rose 0.4% to 77.40 yen. Italy will auction 8 billion euros ($10.7 billion) of bills today, after the country's two-year yield climbed 20 basis points yesterday to 7.32 percent, the highest since 1997.
MCX benchmark gold tumbled below Rs. 28500 and may fall to Rs. 28370 and Rs. 28200 levels today. Earlier this month, MCX gold prices hit a record high Rs. 29,295 per 10 grams. According to the World Gold Council's latest Gold Demand Trends, total jewellery demand for the first nine months of the year dropped to 464.4 metric tonnes from 471.9 tons a year ago, while investment demand grew 26 per cent on year to 296 tonnes.
