London: Gold broke below the psychological level of $1,300 (Dh4,774) an ounce for the first time in a week on Thursday as robust economic data from China and the Eurozone deterred investors from buying into safe haven assets like the metal.
Spot gold fell 0.4 per cent to $1,299.04 an ounce by 1145 GMT, having earlier touched its worst in a week at $1,294.
US gold slid $5.20 to $1,299.30, after stop-loss orders were placed below $1,300 by traders to limit losses, prompting further selling.
The dollar was down 0.1 per cent against a basket of main currencies, mostly due to euro strength after data showed German business activity expanding in July, with the services sector growing at its fastest in three years, suggesting the European economy may be regaining momentum.
After the data release, European shares reversed initial losses due to a raft of mixed company earnings, while Asian stocks had risen after China’s factory activity expanded at its fastest pace in 18 months in July, bolstering hopes for recovery in the world’s second-biggest economy.
“The market is going to follow very closely any comments from the Federal Reserve about interest rates as that is likely to continue having an impact on gold’s trading pattern,” Natixis analyst Bernard Dahdah said.
“Going forward I don’t think there is going to be much support for gold, with Chinese demand dwindling and investor demand remaining subdued.” The market will now focus on US weekly jobless claims, due at 1230 GMT, to gauge the strength of the world’s largest economy.
Gold had seen support build around the $1,300 level on deepening violence in the Middle East and Ukraine that burnished its appeal as an insurance against risk.
Bullion could still see some safe-haven bids as Gaza fighting raged on Wednesday. A truce involving a withdrawal of Israeli ground forces from the Palestinian territory would be unlikely before next week, an Israeli cabinet minister said on Thursday.
Kiev said two of its fighter jets were shot down over the rebel-held territory in eastern Ukraine on Wednesday, and the missiles that brought them down might have been fired from Russia.
Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose for a second straight day on Wednesday, up 0.6 tonnes to 805.44 tonnes.
With prices dropping below $1,300, China’s physical buyers — who had been waiting on the sidelines in recent weeks — came back to the market, albeit in a small way.
The country is the world’s biggest bullion consumer.
Prices on the Shanghai Gold Exchange edged up to a premium of $3-$4 an ounce to the global benchmark from about $1-$2 on Wednesday.
However, despite the increase in buying on Thursday, demand remains weak compared to earlier this year, dealers said.
China’s net gold imports from main conduit Hong Kong fell to a 17-month low in June as a weaker yuan and adequate stocks curbed fresh purchases.
Sluggish physical demand in Asia could weaken support for any price rally and fail to provide a floor if prices were to decline.
China’s gold demand slumped by a fifth in the first six months of 2014, the China Gold Association said in a statement on Thursday, hurt by a weaker yuan and strong purchases last year.
Platinum was down 0.5 per cent at $1,470.80 an ounce, while palladium rose 0.1 per cent to $869.70 an ounce and spot silver lost 0.2 per cent at $20.81 an ounce.