Gold prices fell sharply on Tuesday, receiving another blow in mid-Asian trading hours with a reported move to short the market, with the yellow metal falling below the $1,700 level.
In a newsletter this morning, CEO of London-based bullion brokers Sharps Pixley, Ross Norman, said: "Gold received another body blow in mid-Asian trading hours which saw spot prices dip briefly below $1700 before finding support at the technically important $1705 level - the low seen on Nov 15th; a failure of this level after the US opening exposes us to a decline to the next level of technical support at $1672."
Indeed, on the Comex division of the New York Mercantile Exchange, gold for February delivery was lately down $19.6 to $1,701.50 an ounce - below the technically important $1,705 level.
The move during Tokyo lunch hours was said to be by a big fund, and is also thought to be different than the event last Wednesday, which also involved some market shorting and saw gold drop almost $26 an ounce in that session.
"Last Wednesday's sell-off (24 tonnes on the CME opening) was at a time of maximum market liquidity while today's was the reverse - during Tokyo lunch - no liquidity," said Norman.
"But both tested gold and the result was the same. Modest buying on the dips but broadly speaking lacklustre. The squeeze on gold has been a successful ruse by certain players - but more importantly it has exposed gold."
Still, gold has rallied this year, with the February contract up almost 8 per cent so far.
"The newswires are awash with forecasts suggesting record prices next year but, like the gold price today, it lacks a certain conviction. The underlying sentiment in gold - at the moment - totally lacks confidence," Sharps Pixley's CEO said in the note to subscribers.
"If you are looking for a key reason why gold has lacked momentum in the last 12 months - it is because we have manifestly failed to address the immediate needs of the time and that is to deliver a large and liquid physical market - to complement the paper one - that punters can understand and buy/sell in readily."
There are several positive factors supporting gold at the this time, however, including relative euro strength, and the US reaching its debt ceiling in 8 weeks time.