AAP
Gold dropped more than one per cent, on track
for its largest decline in two weeks, as investors worried about slowing
Chinese growth, a warning on France's credit rating and dimming
prospects for a solution to the euro zone sovereign debt crisis.
Bullion fell along with industrial metals
after credit agency Moody's said it may put a negative outlook on
France's tripe-A credit rating. The warning came ahead of a crucial EU
summit, which German leaders said would not yield a miracle cure for the
region's debt crisis.
Also weighing down on gold was news of China's
growth slowed in the third quarter to its weakest pace in more than two
years. In addition, US investment bank Goldman Sachs posted a quarterly
loss, only its second as a public company.
Gold, traditionally a safe-haven metal,
slumped 2.5 per cent in the last two sessions, moving in lock-step with
riskier assets such as equities, which were sharply lower on Monday.
But gold's decline on Tuesday came even as Wall Street rose after better-than-expected bank earnings.
"Gold does not seem to garner the same
safe-haven demand that we did several weeks back, when we'd have seen
concerning news out of Europe have stabilizing effects on gold," said
David Meger, director of metals trading of futures broker Vision
Financial Markets.
"Right now, we are back to the (inverse) dollar-gold correlation."
Spot gold was last down 1.3 per cent at
$US1,649.40 an ounce by 12.24pm EDT (0324 Wednesday AEDT), as a
resurgent US dollar pressured the commodities complex.
The price of gold hit a record $US1,920.30 in early September.
US gold futures for December delivery were
down $US25.70 at $US1,650.90 an ounce. Volume for Tuesday's decline was
markedly higher than the recent quiet trading pace, and on track to be
the the heaviest in two weeks.
A double top, based on the two recent highs
formed in late August and early September, and gold's falling below its
20-day moving average prompted analysts to turn bearish on the metal's
near-term outlook.
"The present dynamic looks to us like one that
can take us all the way back towards $US1,535-1,490 and possibly lower
still. We would not be a buyer of gold for the foreseeable future,"
technical analysts at CitiFX said in a note.
CitiFX added that, however, it still expects bullion to eventually hit its long-term targets of above $US2,000 an ounce.
Independent investor Dennis Gartman, who has
been buying gold in non-US currencies since mid-2009, said he plans to
cut his gold positions by half, citing bearish technical signals and
prospects of margin call selling. Gartner also cut his gold exposure in
August.
The euro fell for a second day against the US
dollar on Tuesday, pressured by disappointing German sentiment data,
Moody's warning on France's credit rating and frustration about the
lingering euro zone crisis.
Normally, sovereign debt fears would heighten investor demand for gold, but the strong dollar weighed too heavily.
Gold's inverse correlation to the dollar is at
its strongest in five months, while its positive correlation to stocks
is around its tightest since June.
In other precious metals, silver fell by 0.3
per cent to $US31.74, while platinum dropped 1.3 per cent to $US1,530.99
an ounce and palladium also shed 0.9 per cent to $US610.22 an ounce.
