Gold edged down below $1,700 an ounce on Friday, heading for its second straight weekly fall, as the euro extended losses on growing fears the two-year-old debt crisis in Europe would drag on and eventually trigger a credit crunch. Instead of rising in times of uncertainty, gold's safe-haven appeal was robbed by declines in equities, which prompted investors to cash in to cover losses caused by the crisis in Europe. A firm US dollar also capped gains.
"It's really draining the liquidity and it triggers, let's say, economic crisis, a stronger dollar overall. It will be tough. Technically, it doesn't look that great," said Dominic Schnider, an analyst at UBS Wealth Management. Spot gold slipped 0.51 percent to $1,685.79 an ounce by 0626 GMT, down from a lifetime high around $1,920 struck in September, with physical buying from jewellers also drying up.
US gold for December contract fell $9 to $1,686.9 an ounce. Physical gold buyers in Asia waited for prices to slip further, with Thanksgiving holiday in the United States also affecting liquidity. "I think sentiment in the physical side is not that bearish, but the funds are more cautious because of fears of recession," said a dealer in Hong Kong, adding that a recent drop in prices had attracted purchases from jewellers.
India gold prices are likely to fall more than 3.5 percent from its peak after a 16 percent rally last quarter as investors resort to year-end profit-taking while tepid wedding demand weighs, a Reuters poll of banks and brokerages found. India's gold demand, which recorded a fall of 20 percent in the September quarter, could rise in the last quarter and surpass the 1,000 tonnes demand mark in 2011, according to the World Gold Council figures.
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