BENGALURU (Jan 25): Gold drifted down on Wednesday as Chinese demand ebbed ahead of the Lunar New Year festival, with some analysts warning of further declines, as prices for the metal could be due a technical correction.
That came after bullion touched two-month highs earlier in the week, buoyed by a weaker dollar and uncertainty over the policies of U.S. President Donald Trump.
Spot gold had fallen 0.5% to US$1,202.90 per ounce by 0617 GMT. U.S. gold futures shed 0.7% to US$1,202.90.
"(Gold was) unable to capitalise on a softer dollar with Chinese physical demand beginning to wane, as we head ever closer to the New Year holiday period," MKS PAMP Group trader Sam Laughlin said in a note.
The dollar index, which measures the greenback against a basket of currencies, fell 0.1% to 100.270.
Spot gold is due for a deep correction, following its failure to break strong resistance at US$1,219 per ounce, said Reuters technical analyst Wang Tao.
"Gold prices have moved higher since the beginning of the year and need some technical correction in the very short-term," said Jiang Shu, chief analyst at Shandong Gold Group.
"Gold might test levels of US$1,185 during the (Lunar New Year) period."
The metal has rallied about 8% since mid-December, fuelled by worries over Trump's policies. Gold is often seen as a safe-haven investment in times of geopolitical and financial uncertainty.
On Monday, Trump formally withdrew from the Trans-Pacific Partnership trade deal and told U.S. manufacturing executives that he would impose a hefty border tax on firms that import products after moving American factories overseas.
Meanwhile, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.37% to 804.11 tonnes on Tuesday, from 807.07 tonnes on Monday.
Silver dropped 0.8% to US$16.95 on Wednesday.
Platinum fell 1% to US$987.75, after hitting its highest since Nov 10 the session before.
Palladium inched up 0.2% to US$784.72. It marked its strongest in more than 1-1/2 years the day before.