A golden artefact.

Gold prices fell more than 1 percent on Thursday to hit their lowest in nearly four months after breaking through a critical support level on charts at $1,661 an ounce, weighed by year-end investor selling.

Spot gold was down 1.08 percent at $1,648.59 an ounce at 17:17 SA time, having hit a low of $1,646.94 after falling through strong support at its 200-day moving average, a closely watched support level.

US gold futures for December delivery were down 0.98 percent to $1,651.40.

Prices are set for their biggest quarterly drop since the third quarter of 2008 in the October to December period, with the announcement of a fresh round of usually bullion-friendly US monetary easing last month resulting in only temporary gains.

“There has been liquidation ahead of year-end. People have been taking money out of gold and investing in other assets,” said Simon Weeks, head of precious metals at Scotia Mocatta.

Another analyst, Anne-Laure Tremblay of BNP Paribas, said that, in the absence of news, there seemed to be little appetite for a sustained move higher, as a deal was expected to be reached in US budget talks to avert a fiscal crisis.

“This should be mildly positive for risk appetite,” she said.

Conflict over the stalled “fiscal cliff” talks grew more heated on Wednesday, and threatened to become even more so on Thursday, when the action is expected to shift for the first time to the floor of the US House of Representatives.

Financial markets are sensitive to negotiations to avert the arrival of a $600 billion package of tax hikes and spending cuts due to arrive in January. European stocks hit a 19-month closing high on Wednesday on hopes talks were progressing well, but have since retreated.

On the wider financial markets, oil fell below $110 a barrel in choppy trading on Thursday as investors weighed mixed US economic data against a backdrop of the US budget talks.

Silver fell more sharply than gold and dropped 3 percent to $30.06 an ounce. It is on track for its biggest monthly drop since May.


Asia's physical buying picked up after the gold price dropped earlier this week, with some market participants concerned about a potential supply shortfall next week as refineries close for holidays.

In Hong Kong, dealers quoted premiums in the range of 90 cents to $1.40 an ounce, the highest since end of August, up 10 cents from a week earlier.

“Physical buying has picked up, and we may see supply a little tight next week as refineries will have a shortened production week,” one Singapore-based dealer said.

South African police firing rubber bullets dispersed protesting workers at a mine run by Harmony Gold HARJ.J west of Johannesburg on Thursday, in the latest flare-up of labour unrest in the troubled mining sector.

Spot platinum was down 1.64 percent at $1,561.00 an ounce, while spot palladium was down 1.2 percent at $682.75 an ounce. Palladium has been the best performer of the precious metals so far this quarter, currently up 7.8 percent.

The autocatalyst metal is highly exposed to the US and Chinese car markets, which have shown signs of growth recently, while platinum is more heavily used in by European carmakers, which remain under pressure.

This week palladium was at its most expensive compared to gold since March, and its priciest versus platinum since April. - Reuters