Gold ended the session on Friday hunkered at a six-month low, as a breach of key chart support levels attracted more sellers who briefly sent the precious metal below $1,600.
Softer appetite for the precious metal from investors and a dearth of physical demand from China during the Lunar New Year holiday put the metal on track to slip 3 percent this week, its biggest weekly drop since June.
The yellow metal hit a low of $1,596.70 an ounce, its weakest since Aug. 16, before recovering to claw back above $1,600. U.S. gold futures for April delivery ended down more than 1.60 percent, settling at $1,609.50
"The 1,625 level was a big support and once that was broken, stop-selling orders kicked off and now we are in a new range of $1,550 to $1,625," said Adrien Biondi, head of precious metals trading at Commerzbank.
Sell stops are automatic technical selling signals that start after prices break through key support levels, which allow traders to limit losses in a falling market.
Losses in the euro also pressured the metal. The single currency remained in negative territory against the dollar after data showing manufacturing in New York state expanded in February for the first time in seven months.
Gold investment has softened this year on signs that economies such as the United States and China are picking up, while continued problems of sovereign debt and economic weakness in Europe seem to be priced in by the market.
"The market now seems to be getting used to the more positive frame of mind of a recovering U.S. (economy) - which entails lower probability of continued QE and in turn a lower gold price," MKS Capital said in a note.
The next focus for the market remains a G20 meeting and ensuing statement, which could affect broader markets by giving more clues on currencies.
"(The Group of 20) will try to put the 'currency wars' discussion to rest," MKS added. "Given the uncertainty around the meeting's results, (there could be) volatility... next Monday."
The physical market was again subdued in Asia. Chinese players, however, were expected to take advantage of the lower prices to replenish stocks when they return from their week-long public holiday for the Lunar New Year celebrations.
"With prices coming lower, all the physical buyers will start covering some of the shorts and maybe some investors will come around as well," Commerzbank's Biondi said.
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