Gold settled at its lowest level since late June on Thursday, extending losses to a fifth session, as fears about an early interest rate hike by the U.S. Federal Reserve sparked a technical sell-off after prices broke below a key support level.
Bullion was hit hard by follow-through selling after minutes from the Fed's July meeting showed on Wednesday policymakers debated whether interest rates should be raised earlier given a surprisingly strong job market recovery, traders said.
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Economic optimism also pressured gold on encouraging U.S. housing and jobs data on Thursday, when bullion underperformed the precious metals complex and equities, with the S&P 500 index up 0.4 percent to a new intraday record.
In overnight trading between 2:00 a.m. and 2:05 a.m. ET, more than 8,000 lots changed hands for the December contract, or about one-third of the volume at the time, when prices broke below $1,287 an ounce, the 200-day moving average where traders placed stop-loss orders, traders said.
"Now that we have crossed below the 200-day moving average, an important threshold watched by many, a lot of trend-following traders are likely to establish short positions in gold," said Phillip Streible, senior commodities broker at Chicago-based RJO Futures.
for December delivery settled $19.80 lower at $1,275.40 an ounce. Spot gold fell 1.3 percent to $1,276 an ounce, having earlier traded as low $1,273.06 an ounce, its weakest since June 18.
Investors largely ignored data showing holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.9 tonne to 800.09 tonnes on Wednesday, the third straight daily increase.
Analysts said the next focus for the market will be Fed Chair Janet Yellen's comments at the Jackson Hole central bankers' gathering on Friday.
—By Reuters with CNBC