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[SINGAPORE] Gold fell to its lowest level in four weeks on Monday, extending a sell-off into a fourth straight session as investors feared the Federal Reserve would hike U.S. interest rates this year.
The technical picture for gold has deteriorated, with traders warning of further price drops. Physical demand and investor flows have also not supported the metal.
Spot gold had eased 0.2 per cent to US$1,139.93 an ounce by 0348 GMT, after earlier dropping to US$1,134.60, its lowest since Oct 5.
Gold had rallied last month on speculation that the softness in the global economy could prompt the Fed to delay the rate hike to next year. But the US central bank's hawkish tone last week triggered a sell-off in bullion.
Technical selling and liquidation of long positions were sending prices lower, according to HSBC analyst James Steel.
"Gold probably needs moderately better emerging market import demand if it is to sustain a rally. In the near term, the market also needs a respite from investor liquidations if prices are to stabilise," Steel said.
Asian gold demand saw some uptick towards the end of last week, as lower prices attracted buyers. But local premiums remained largely unmoved, a sign that demand hasn't picked up in a significant way, dealers said.
Demand outside of Asia also remained soft. US Mint American Eagle gold coin sales slumped 73 per cent in October.
Investors were seen reducing their gold exposure. Assets in SPDR Gold Trust, the top gold-backed exchange-traded fund, fell 0.3 per cent to 692.26 tonnes on Friday.
Speculators trimmed a bullish bet in gold from an 8-1/2-month high in the week ended Oct 27, while they boosted a net long stance in silver to the highest level on record.
Traders have been selling gold since the Fed on Wednesday surprised with a direct reference to its next policy meeting as a possibility for the first U.S. rate hike in nearly a decade.
The metal had posted its worst weekly drop in nine weeks on Friday.
Rising interest rates tend to weigh on gold because they lift the opportunity cost of holding non-yielding bullion.
Gold failed to see safe-haven bids on Monday despite weakness in the dollar and equities. Asian stocks slid after soft Chinese factory surveys stoked global growth concerns, while the dollar slipped.
Gold is expected to test support at US$1,131, a break below which could cause a loss towards the next support at US$1,119, said Reuters technicals analyst Wang Tao.