London - Gold fell on Monday to near a recent four-year low as the dollar index rose to its highest since mid-2010 on speculation that the US Federal Reserve will act before other major central banks to tighten monetary policy.
Silver prices also tumbled, with the metal touching its lowest since March 2010 at $15.72 (R174) an ounce and its cheapest level compared to gold in more than five years.
Spot gold was down 0.2 percent at $1 171.20 an ounce at 12:38 SA time, while US gold futures for December delivery were down $1.00 an ounce at $1 170.60.
Strength in the dollar knocked gold below key support at $1,180 an ounce on Friday, sparking a wave of selling that took prices as low as $1 161.25 an ounce.
“(Fresh buying) is very difficult to imagine, given the outlook for the US dollar, which is weighing on the gold price in addition to technical selling,” Commerzbank analyst Eugen Weinberg said.
“There are very few fundamental factors which could ignite a turnaround in gold's fortunes, so at the moment it seems to be under further pressure,” he said.
The US unit hit a seven-year peak against the yen and a two-year high against the euro after the Bank of Japan opted to boost its already massive bond-buying stimulus last week, and due to market talk of further easing from the European Central Bank when it meets later this week.
That pushed the dollar index, which measures the US unit's performance against a basket of currencies, to a four-year high.
The contrast between a raft of relatively upbeat data from the United States and weaker readings on growth from other economies have boosted expectations that US monetary policy will tighten more quickly than elsewhere.
CHINESE BUYERS STICK TO SIDELINES
Friday's drop in prices did little to spark interest among normally price-sensitive Asian buying of physical metal, dealers said.
In China, the world's biggest buyer of gold, local prices slipped to a discount to the global benchmark.
“Chinese demand was again a little disappointing considering how much lower we are trading, with modest volume going through
the benchmark AU9999 kilobar contract,” precious metals house MKS said in a note on Monday.
“Premium was also disappointing with the SGE trading at a discount of around $0.50-1.00 for the first hour of trade, clearly reflective of their lack of interest.”
The $1 180 level, which gold broke through on Friday, was seen as a significant one for bullion, with chartists now eyeing prices below $1 000.
Hedge funds and money managers cut their bullish long position in gold in the week up to October 28, the Commodity Futures Trading Commission said on Friday.
Outflows from SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, accelerated in October, with holdings of the fund now at a six-year low.
Among other precious metals, silver was down 0.5 percent at $16.06 an ounce.
Platinum group metals rose, meanwhile, with spot platinum up 0.6 percent at $1 235.24 an ounce and spot palladium up 1.8 percent at $801.98 an ounce.
Analysts are watching global car sales data for clues on the strength of demand for platinum group metals, which are widely used in autocatalysts.
Toyota Motor, one of the world's biggest carmakers, and its two Chinese joint ventures reported at 27.1 percent rise in Chinese vehicle sales in October. - Reuters