Gold was little changed as the dollar pared gains on Wednesday, after bullion inched down to the lowest in more than three months following the previous day's sharp sell-off and a technical break well below the key $1,300-an-ounce level.
Spot silver and platinum prices also extended losses to the lowest since late June.
Spot gold was down 0.1 percent at $1,267.96 an ounce at 3:23 p.m. ET, after falling to $1,261.59, the
lowest since June 24, when the market reacted to Britain's shock vote to leave the European Union. This followed Tuesday's 3.3 percent fall, its biggest daily loss in three years. U.S. gold futures for December delivery settled down 0.1 percent at $1,268.60.
Traders said a break of the 200-day moving average at $1,258 could spark another sell-off, which could drive gold toward $1,248, a Fibonacci retracement level. "The stronger dollar, a break of key technical levels, speculative positioning which was very long, weak physical Chinese and Indian demand all contributed," said Carsten Menke, analyst at Julius Baer, referring to recent weakness.
"We could see more speculators head for the exit. You could see a downward spiral, and the big risk is it spills over into the physical market."
"Gold prices slumped as strong U.S. data and hawkish U.S. Fed comments spurred expectations for a December Fed rate hike," said UBS Wealth Management Research in a report, adding that it has lowered its three-month estimate to $1,225 to $1,375 from $1,275 to $1,425.
"We lower our three-month trading range by $50/oz because a December hike is still not fully priced, and a solid U.S. payrolls number on 7 October could prompt further profit-taking by a similar magnitude."
Traders turned their attention to U.S. payrolls data for September, due Friday. Also weighing on gold is weak demand from physically backed exchange traded funds, at 56.753 million ounces on Tuesday, not much higher than the 56.266 million ounces recorded on Sept. 1.
Silver was down 0.01 percent at $17.78 an ounce, after falling to $17.51, the lowest since June 24. "We see investors buying gold and, especially silver, on any pullback in the prices as some silver investors see silver as a better chance of tripling in price in the future," said Walter Pehowich, vice president of Investment Services for Dillon Gage Metals.
Platinum was down 0.8 percent at $974.15, after falling to $966.10, the lowest since June 28, while palladium was down 3 percent at $676.30.