Reuters reported that gold dropped more than half a percent in volatile trade heading for its third week of decline after shares fell in Asia and the US dollar firmed while persistent fears about the health of the global economy also dragged.
Bullion has fallen around 5% since hitting an 11 month high above USD 1,795 an ounce in early October after the excitement ignited by the US Federal Reserve's latest program of purchasing mortgage backed debt died down.
Although jewelers are likely to chase gold at around USD 1,700, the market will be volatile before the US presidential election in early November.
Gold hit a high for the day at USD 1,714.65 an ounce before slipping to USD 1,702.96 by 0618 GMT down USD 8.23. It dropped to 7 week low around USD 1,698 when the Fed said it was sticking to its plan to keep stimulating growth until the job market improved.
Mr Ronald Leung director of Lee Cheong Gold Dealers in Hong Kong said that “A stronger dollar dragged down gold prices and selling picked up after bullion failed to break through key resistance at USD 1,725 an ounce. People are still looking a bit at the downside rather than the upside for the time being, waiting for it to break USD 1,700. Actually there are too many longs in the market."
Dealers are also keeping an eye on the weekly US CFTC commitment of traders figures due at 1930 GMT after last week's data showed hedge funds and other big speculators cut their bullish bets on US commodities to the lowest levels since the end of August. US gold for December fell USD 9.10 an ounce to USD 1,703.90.
Gold's recent decline has also been driven by uncertainty related to the so called fiscal cliff automatic spending cuts and tax rises which threaten to send the country back into recession if Congress fails to reach a deficit reduction deal by the end of the year. Even if a protracted period of negotiations injects a large level of uncertainty into the markets that could benefit safe haven assets such as US Treasuries and therefore the dollar.
Investors were waiting for the release of US Q3 gross domestic product later in the day which could set the tone for the dollar. The annualized rate of growth in the world's largest economy is seen at 1.9% picking up from an anemic 1.3%.
Mr Yuichi Ikemizu branch manager for Standard Bank in Tokyo said that "At least we have confirmed the bottom at USD 1,700. We traded once below that just briefly but it looks like after that, there's more buying than selling. I don't think we are going to see more panic selling. Gold could trade in a range of USD 1,700 to USD 1,740 next week.”
Q
