NEW YORK/LONDON: Gold dropped to a four-week low on Thursday, as renewed liquidation in gold-exchange traded funds and its recent drop below the $1,400-per-ounce level spooked bullion investors, prompting them to favor other assets.
Traders said the fall below $1,400 in the previous session triggered heavy selling and that the yellow metal might retest two-year lows of $1,321.35 touched on April 16, when it recorded the worst daily loss for 30 years.
"Bullion's price break below the psychological $1,400 an ounce level may introduce additional near-term pressure on gold. However, physical bullion demand is likely to pick up further, given the price drop, to help stem potential losses," said James Steel, chief precious metals analyst at HSBC.
Spot gold was down 0.4 percent at $1,386.05 by 5:28 p.m. EDT (2128 GMT).
US gold for June delivery settled down $9.30 at $1,386.90 an ounce.
Rallying Wall Street stock indexes have hurt bullion's appeal as an alternative investment this year, leading to hefty outflows from gold-backed exchange traded funds.
The largest gold ETF, the SPDR Gold Trust, reported a further 4.5 tonne-drop in its holdings on Wednesday to 1,047.14 tonnes - the lowest since March 2009.
"We're seeing some of the pension funds selling via the ETFs, which is a bit of a worrying sign," said Standard Chartered analyst Daniel Smith.
Soros Fund Management LLC joined funds including Northern Trust and BlackRock in lowering its investment in the SPDR Gold Trust in the first three months of the year, a SEC filing showed on Wednesday.
Gold investment nearly halved in the first quarter as a brighter view of the US economy prompted investors in the West to favor assets such as stocks over bullion, the World Gold Council said on Thursday.
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