LONDON - Gold has fallen more than one per cent to $US1,089.75 an ounce as a price slip below $US1,100 sparked technical selling, and amid caution ahead of Federal Reserve chair Ben Bernanke's congressional testimony later on Wednesday.
Prices hit their weakest since Feb. 12 after they broke resistance at $US1,100 an ounce, prompting automated selling. Spot gold was at $US1,091.30 an ounce at 2056 AEDT, against $US1,102.95 late in New York on Tuesday.
Ole Hansen, senior manager at Saxo Bank, said the precious metal was reacting to a retreat in risk appetite, and to unfavourable technical factors.
"We are back below $US1,100 an ounce. That's a technical level we managed to bounce from a couple of times last week, we are now through and we have to find support once again," he said. "The (next) level is around the $US1,073 area."
US gold futures for April delivery on the COMEX division of the New York Mercantile Exchange slipped $US4.40 to $US1,098.30 an ounce.
The dollar held broad gains on Wednesday after weak US consumer confidence data the previous day stung risk appetite. The euro climbed against the US currency in early trade, but struggled to sustain gains.
Currency traders awaited Ben Bernanke's congressional testimony for clues as to the future direction of the foreign exchange markets.
Bernanke's testimony was likely to include debate over financial regulation and questions over the central bank's evolving strategy to remove unprecedented monetary stimulus from the financial system.
"If, as we suspect, he maintains the clear stance to a loose monetary policy, the market will buy dollars on the hoped-for support this will give the economy," said Credit Agricole CIB in a note.
"If he signals that the exit strategy is picking up pace, either the prospect of higher yields will bolster the dollar, or a nervous market, post the consumer confidence figure, will worry about activity and swing toward the dollar.
"Hence, without a clear mood change it looks like heads I win and tails you lose as far as the dollar is concerned."
Commodities slip
Among other commodities, oil gave up early gains to decline and base metals weakened as weak US consumer confidence data released on Tuesday continued to blunt appetite for assets perceived as higher risk.
Gold tends to track crude prices, as the metal can be bought as a hedge against oil-led inflation. On the wider markets, European shares turned lower after initial gains.
A drop in bullion prices spurred some buying in parts of Asia, but main consumer India was on the sidelines. A lack of activity in China after the Lunar New Year also put pressure on premiums.
Dealers noted bargain buying from jewellers whenever gold slipped, but a rebound in prices also spurred sales of scrap from consumers such as Thailand and Indonesia.
The China Daily reported on Wednesday, citing an unnamed official from the China Gold Association, that China was unlikely to buy 191.3 tonnes of gold being offered for sale by the International Monetary Fund.
In the United States, the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, reported a near 1-tonne outflow in its holdings on Tuesday.
Silver was at $US15.68 an ounce versus $US15.82, platinum at $US1,496 an ounce versus $US1,510, and palladium at $US427 against $US428.50.
