Gold falls in market turmoil

Gold dropped below the psychologically important $1,700 level during Asian trading hours. A close under $1,700 would be the first in more than two weeks. The fall in gold prices more than offset the modest gains the metal recorded Friday, when it rose 0.2%. A higher dollar pressured gold and other commodities, and also siphoned safe-haven buying away from the metal. The U.S. dollar index DXY +1.01% , a measure of the greenback against six major global counterparts, rose to 79.288 from 78.622 in North American trade Friday, weighing on precious metals that are priced in the currency. 

The drop for gold futures also came as one analyst highlighted doubts about emerging-market demand, noting last week’s data on a sharp drop in China’s inflation and India’s reduction of its growth target for the financial year ending March 2012. “Between them, India and China account for [about] 55% of global gold- jewelry demand and without a strong import market in at least [the] two largest gold consumers, it would be difficult for gold prices to advance significantly and sustain a rally,” HSBC analyst James Steel wrote in a report. From a technical perspective, gold looks like it’s about to become oversold, suggesting investors buy on weakness, analysts at KASB Securities Ltd. said in a note to clients. Support for gold would come between $1,691.28 and $1,699.45 an ounce, they said.

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