NEW YORK/LONDON: Gold fell to its lowest in nearly three months on Wednesday, sliding for a second straight session the day after minutes of the latest Federal Reserve policy meeting doused hopes for further US monetary stimulus.
Bullion, tracking losses in equities and crude oil, posted its biggest two-day drop since Feb. 29 and could test technical support near the December lows around $1,530 an ounce. The more thinly traded silver and platinum group metals markets also tumbled.
Gold has dropped 5 percent in the last six sessions. The Fed minutes, released on Tuesday afternoon, set off the latest round of selling. Economists and gold analysts had largely factored in another round of stimulus by the Fed after the US central bank in January said it would keep rates near zero until 2014.
"The change in the Fed's attitude caught a lot of folks by surprise. As we are not going to see as much stimulus, we are not going to see as much inflation pressure in the metals," said Sean McGillivray, head of asset allocation in Great Pacific Wealth Management.
Spot gold was down 1.5 percent at $1,620.85 an ounce by 2:55 p.m. EDT (1855 GMT), having earlier touched a low of $1,611.80, its lowest since Jan. 10.
US gold futures for June delivery settled down $57.90 an ounce, or about 3.5 percent, at $1,614.10, with trading volume about 10 percent below its 30-day average, preliminary Reuters data showed.
Spot silver was down 4.3 percent at $31.23 an ounce.
Gold has fallen 3 percent so far this week, retreating more from the March high above $1,790 an ounce on QE3 hopes.
McGillivray said gold's record high at above $1,900 an ounce in September 2011 reflected the premium of a third round of Fed asset buying known as quantitative easing (QE).
Some hedge funds which bet on gold as a hedge against the diminishing purchasing power of the US dollar might have reduced their exposure to the metal, especially after a strong run of US economic data and as the European debt situation appeared to stabilize.
"I wouldn't be surprised if we push lower towards $1,600 - that is what we think is a floor and we are unlikely to fall substantially below that," Standard Bank analyst Walter de Wet said.
On chart, the metal also broke below its 300-day moving average for the first time this year.
Global Hunter's Hasting said, however, $1,550 an ounce could be a good entry point for institutional investors after they were on the sidelines after the rallies in the first quarter.
FED EASING HOPES FADE FURTHER
Minutes of the US central bank's policy meeting showed only two of the policy-setting Federal Open Market Committee's 10 voting members saw the case for additional monetary stimulus.
Ultra-loose monetary policy, which keeps real interest rates low, reducing the opportunity cost of holding gold, helped drive the metal to record highs in 2011.
"Gold responds better during periods of greater stress. And the last couple of months seemed to be a relatively stable and quiet period, and ," said Richard Hastings, macro strategist at investment bank Global Hunter Securities.
"If we were to break below $1,550, more significant doubts might emerge about gold's capability to regaining longer term price trends to the upside," Hastings said.
Other precious metals were weaker across the board, with spot platinum down 2.4 percent at $1,594.99 an ounce, and spot palladium down 2.4 percent at $632.75 an ounce.
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