Gold fell to a one-month low on Monday, hit by technical selling after prices slid through key support levels, and as investment appetite for the metal was hurt by a sluggish price performance in the year to date.
Lack of liquidity during the Asian Lunar Year also exacerbated volatility, exaggerating downward moves. China, Japan, Singapore, Hong Kong and Korea were among the major regional markets that are closed this week.
Spot gold was down more than a percent to trade around $1,648 an ounce, its lowest since January 7. Sell stop orders were triggered as the metal fell out of its recent range between $1,660 and $1,680 and as selling accelerated as the metal broke below its late January low of $1,651.93, traders said.
Prices were down about one percent in mid-morning trade under $1,651. U.S. gold futures for delivery in April dropped by $17.80 to settle at $1,649.10 an ounce.
Selling pressure had started after the metal failed to hold onto 10-day high of $1,683.56 hit on Tuesday, triggering investor liquidation. Analysts had priced in a move lower this week, with many market players out of the market.
"There is less liquidity in the market this week, with fewer traders due to the Asian holidays and also absence in some parts of Europe like Germany, where there are Carnival celebrations this week," Adrien Biondi, head of precious metals trading at Commerzbank, said.
The metal started the day on the back foot as the dollar hit a one-month high against a basket of currencies, the euro briefly dipped to a two-week low before settling at unchanged levels and the rest of the commodities complex fell.
"Gold is also following the rest of the commodity complex lower, with Brent crude oil and copper both down one percent," Tobias Merath global head of commodity research at Credit Suisse said.
"We are still seeing some outflows from ETFs and there is some general profit-taking," he added.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, showed a 1.2-tonne outflow in holdings so far in February, compared to inflows of 6.05 tonnes in the same 2012-period.
But data from the U.S. Commodity Futures Trading Commission showed that speculators raised net longs in gold by 4,845 lots to 86,926 in the week to February 5.
G20 Meeting in Focus
Markets will be on watch for any discussion on the strength of the euro ahead of the G20 meeting at the end of the week, after two officials said separately that the Group of Seven nations are considering issuing a statement reaffirming their commitment to "market-determined" exchange rates in response to heating rhetoric about a currency war.
Among other precious metals, platinum and palladium followed gold and silver lower, as investors exited positions.
Platinum was down 0.7 percent to $1,716 an ounce, well below its strongest level since September 2011 at $1,74, which it hit last Wednesday. Palladium inched down about 0.7 percent to $747.50 an ounce. The metal rose as high as $769.50 on Thursday, also its peak since September 2011.
Year to date, platinum group metals have outperformed gold and silver on a combination of supply worries in the world's biggest producer South Africa, as well as a drop in palladium output from Russia, and signs of improved global economy, which bode well for the metals' industrial demand.
"Ongoing cost pressures (in platinum) will push up marginal costs, supporting prices," analysts at Canaccord Genuity said in a note.
"In the short term, the palladium market looks the tightest and, without Russian stockpile sales, may be the first to swing to a deficit," they added.