Gold tumbles 1.7%, lowest since mid-July

Reuters with CNBC
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Gold settled at its lowest level since mid-July on Tuesday, breaking through key support at August lows as the dollar hit a one-year high against the euro ahead of a European Central Bank meeting this week.

In the 10 minutes between 6:30-6:40 am EDT, gold's losses snowballed, with more than 10,000 lots—or one-third of the volume at the time—changing hands after the yellow metal fell below key technical support at $1,275 an ounce and the Aug. 21 low at $1,273.06, traders said.

U.S. gold futures settled $22.40 lower, or 1.7 percent, at $1,265.00 an ounce—its worst day since July 14. Spot gold, meanwhile, plunged 1.8 percent to $1,265 an ounce.

Speculation that the European Central Bank will do more to help a wobbly euro zone economy, combined with data showing encouraging U.S. manufacturing activities and construction spending, boosted the U.S. currency against the euro.

Chart: Precious Metals

"It's when the dollar hits big numbers that gold gets punished and this is clearly one of those moments," Ross Norman, chief executive of bullion broker Sharps Pixley, said.

"There is a lot to be concerned about on the political and economic front (but) people tend to get inured to the idea of bad news and it doesn't affect them anymore."

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The euro sank to a one-year low against the dollar on bets of more monetary stimulus by the ECB when it holds policy meeting on Thursday.

"The very strong dollar is definitely taking a toll on commodities, more than offsetting geopolitical tensions," said Bill O'Neill, partner at New Jersey-based commodities investment firm LOGIC Advisors.

—By Reuters with CNBC