Gold falls to 2-1/2-wk low

Gold dropped to a 2-1/2-week low on Monday, extending falls from the previous session, as stop-loss selling more than offset support from China inflation data suggesting there was more room to ease monetary policy.

Gold staged its biggest daily loss in more than two months on Friday, after data showed US consumer sentiment rose to a five-year high, adding to concern that the Federal Reserve's latest round of quantitative easing (QE3), aimed to improve job market and supporting growth, may be trimmed.

China's annual consumer price inflation ticked down to 1.9 per cent in September from August's 2.0 per cent, leaving plenty of room for further policy easing to shore up growth, which would help support gold's role as a hedge.

 

But momentum in gold remained to the downside after the data release, as the slide from Friday's intra-day high above $1,770 triggered stop-loss selling that was still pushing prices lower, traders said.

"We traded through lots of stops this morning," said a Singapore-based trader, "The China inflation story is outweighed by such selling."

Spot gold fell to a 2-1/2-week low of $1,741.24 an ounce before paring some losses to $1,744.06 by 0644 GMT, down 0.6 per cent from the previous close.

US gold lost 0.8 per cent to $1,745.80.

Technical analysis suggested that spot gold could extend losses to $1,717 an ounce after it broke below support at $1,747, said Reuters market analyst Wang Tao.

The upbeat US data, together with the lingering uncertainty over the euro zone debt crisis, helped the dollar to snap three days of losses, putting pressure on dollar-priced commodities.