Comex gold fell more than 2 percent on Wednesday to its lowest price in more than three months, as the dollar rebounded on reports that the European Central Bank stood ready to intervene to slow the euro's rise.
Remarks on Wednesday by Federal Reserve Chairman Alan Greenspan before the US House of Representatives Budget Committee that the United States could not grow itself out of its budget deficit, which has fuelled selling of the dollar on world markets, did nothing to slow the greenback.
Benchmark April gold breached on Friday's low point as it fell to $393.00 an ounce, it's cheapest since November 26.
Estimated volume was brisk 70,000 contracts, compared with Tuesday's official 36,431 contracts. April settled at $396.10 an ounce, down $8.70, having topped overnight at $404.80.
Spot gold fell to $395.75/6.45 from $403.90/4.40 late on Tuesday and London's on Wednesday afternoon fix at $400.25.
The euro fell to $1.2486/91 from $1.2683/87 late on Tuesday, making dollar-priced gold less affordable and a better sell for holders of the European currency.
In a television interview, Schroeder asked the European Central Bank to "intensively" consider rate cuts to counter the strength of the euro, which he said was causing problems for German exporters.
The fall below $400 came at mid-morning after gold options expired in London. Right before then, gold had traded between the popular $400 and $405 strike prices.
Demand from price-sensitive physical buyers was expected to support bullion below $400 an ounce, as it helped do on Friday, when gold fell to $394.50.
It tried recovering, going up $5.50 on Tuesday, as the dollar slumped on a disappointing US consumer confidence report. Dollar disinvestment lifted gold to a 15-year high on January 6 at $432.30.
March silver fell 8.7 cents to $6.535 an ounce, trading from $6.80 to $6.51. Daily ranges for silver, seen as both a precious and industrial metal, have been very wide this year, due to increased speculative activity by commodity funds.
Spot silver last fetched $6.53/55, down from $6.59/61. On Wednesday's fix was at $6.7575.
"The metal has run into selling interest following the euro's weakening," wrote analyst James Moore at TheBullionDesk.com.
"A shortage of liquidity will continue to be a bugbear for the market but for now continues to work in the metal's favour, keeping volatility levels high."
Nymex April platinum went down $4.30 to $851.80 an ounce. Spot was last priced at $852.00/856.00.
March palladium fell $8.40 to $226.00 an ounce. Spot fetched $224.00/229.00.
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