LONDON — Gold prices extended losses on Friday to hit a six-month low as a breach of key chart support levels at $1,625, its previous low for the year, and $1,620 triggered technically-driven selling.
Softer appetite for the precious metal from investors and a dearth of physical demand from China during the Lunar New Year holidays put the metal on track to slip 3% this week, its biggest weekly drop since June.
Spot gold hit a low of $1,608.11 an ounce, its weakest since August 16, and was at $1,615.01 by 2.28pm GMT, down 1.2%. US gold futures for April delivery were down $21.6 an ounce at $1,614.20.
The next technical support was now seen at $1,600, traders said.
"The 1,625 level was a big support and once that was broken, stop selling orders kicked off and now we are in a new range of $1,550 to $1,625," said Adrien Biondi, head of precious metals trading at Commerzbank.
Sell stops are automatic technical selling signals that start after prices break through key support levels, which allow traders to limit losses in a falling market.
Losses in the euro further pressured the metal. The single currency remained in negative territory against the dollar after data showing manufacturing in New York state expanded in February for the first time in seven months.
Gold investment has softened this year on signs that economies such as the US and China are picking up, while continued problems of sovereign debt and economic weakness in Europe seem to be priced in by the market.
"The market now seems to be getting used to the more positive frame of mind of a recovering US (economy) — which entails lower probability of continued QE (quantitative easing) and in turn a lower gold price," MKS Capital said in a note.
The next focus for the market remains a Group of 20 (G-20) meeting and ensuing statement, which could affect broader markets by giving more clues on currencies.
"(The G-20) will try to put the ‘currency wars’ discussion to rest," MKS added. "Given the uncertainty around the meeting’s results, (there could be) volatility... next Monday."
The physical market was again subdued in Asia. Chinese players, however, were expected to take advantage of the lower prices to replenish stocks when they return from their week-long public holiday for the Lunar New Year celebrations.
"With prices coming lower, all the physical buyers will start covering some of the shorts and maybe some investors will come around as well," Commerzbank’s Mr Biondi said.
Investment interest in gold has suffered in recent months after the latest monetary easing measures from the Federal Reserve failed to push prices above $1,800 an ounce and as US economic data took on a firmer tone.
Data released on Thursday showed billionaire investor George Soros had cut his holdings in the SPDR Gold Trust, the world’s largest gold exchange-traded fund, by more than half in the fourth quarter, while GLD’s biggest shareholder John Paulson left his holdings unchanged.
A few others also cut exposure to gold, including investment fund PIMCO and Tiger Management’s Julian Robertson, who dissolved his entire stake in Market Vectors Gold Miners ETF.
The SPDR’s holdings fell 0.23% on Thursday from Wednesday, while those of the largest silver-backed ETF, New York’s iShares Silver Trust, rose 0.26% during the same period.
In other precious metals, platinum and palladium gave up gains made at the start of the week and followed the rest of the complex lower.
Spot platinum declined to a two-week low of $1,668 an ounce and was later seen at $1,672.99 an ounce, down 2%.
Palladium was down 1.6% to $750.97, retreating from a new best since September 2011 at $775 hit on Wednesday.
Spot silver fell to a five-week low of $29.87 an ounce, before settling at $30, still down 1.3%.