SINGAPORE: Gold hit a fresh 3-1/2 week trough below $1,300 on Tuesday as investors fretted over the timing of the US Federal Reserve's stimulus tapering, while physical demand was not strong enough to put a floor under prices.
The metal fell for a fourth straight session, notching up losses of 3 percent over the period, as strong data on US economic and jobs growth increased fears of an early end to the Fed's $85 billion monthly bond purchases.
Despite the recent strong data, many analysts expect the Fed to stick with its stimulus measures for now as the US fiscal outlook remains uncertain with the government set to face another deadline to avoid a debt default early next year.
"We think the markets have overreacted to the recent news coming from the United States," said Alexis Garatti, an economist at Haitong International Research in Hong Kong.
"We could see markets revise their expectations in the coming days," said Garatti, adding that gold prices could recover in the short term as the tapering gets pushed out.
Spot gold fell 0.4 percent to $1,278.11 an ounce by 0341 GMT. It hit $1,276.29 earlier - its lowest since Oct. 17.
Gold has fallen nearly 25 percent this year on expectations that the Fed would cut back on bond purchases this year, so any delay could provide a boost to prices.
However, gains could be kept in check by weakness in technical charts and physical demand.
Gold's drop below $1,300 on Friday has failed to attract buyers in Asia as customers expect prices to weaken further. Dealers say buyers would come in as prices fall towards $1,200.
Physical demand typically does not boost or weaken global prices but sets a floor during a price drop as lower prices increases the metal's appeal.
"Price action is likely to remain heavy, with little sign yet of a boost in physical demand," ANZ analysts said in a note.
"On the downside, the market will be eyeing a break of the $1,277 level, which could open up a test of further retracement down to $1,250," ANZ said, adding that upside resistance was at $1,290.
BNP Paribas on Monday raised its year-end gold price outlook to $1,415 an ounce but lowered its 2014 forecast to $1,095.
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