Gold dropped in intraday trade on Monday on fresh uncertainties over the rollback of the US Federal Reserve's bullion-friendly stimulus programme, extending losses after a sharp fall in the previous session, with subdued demand from India and China also weighing on the prices.
Spot gold fell 0.23% at $1,322.77 an ounce at 7.38 ET, while December US gold futures shed $9.90, or 0.74%, an ounce at $1,322.60. In Delhi, gold prices declined by R250 to R30,250 per 10 gm on reduced demand from jewellers.
The precious metal tumbled by around 3% on Friday after St Louis Federal Reserve chief James Bullard said the Fed could reverse last week's unexpected decision to continue with monetary easing at its next meeting.
Spot gold in the US jumped 4.2% on September 18, marking its biggest daily gain since June last year, after Fed chairman Ben Bernanke defied market expectations of an up to $10-billion cut in its its bullion-friendly $85-billion bond-buying programme per month, and also refused to commit a time-frame for the rollback.
Before the Fed's announcement on Wednesday, gold had lost 20% since May when the US central bank had first hinted about the exit starting September.
The Fed's easy money policy has supported the gold rally in recent years, as the precious metal acts as a hedge against inflation and is often valued for its safe-haven appeal. A weak dollar also makes greenback-denominated commodities, including gold and crude oil, more attractive for users of other currencies and helps prop up their demand.
However, prices have crashed by over a fifth this year, mainly on apprehensions that the Fed may curtail its bond purchases before the end of 2013. Uncertainty over the timing of the move has stoked volatile trading.
Physical demand from India and China, the world's top consumer, has also remained weak, driving down the frenzy for the precious metal. While Indian buyers are awaiting further fall in prices, which have been influenced by a weak rupee, Chinese buyers are back after the mid-autumn holiday.
Moreover, gold imports in India dropped 95% in August from a month before to 2.5 tonne, following a