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Gold notched its biggest weekly drop this year as an improving global economic outlook sent the safe-haven metal below a key technical support.
Bullion fell below its 200-day moving average, which it had held for the most part in the last five months, as US equities measured by the S&P 500 rose for an eighth day for its longest winning streak in more than eight years.
Friday's encouraging US housing data and signs of stability in the euro zone pressured gold. Traders said next week's Federal Reserve policy meeting and US employment data will likely set the tone for the gold market.
"If next week's unemployment number comes in a little better than expected or even at expectation, that will put pressure on the market," said Frank McGhee, head precious metals trader at Integrated Brokerage Services LLC.
Spot gold was down 0.6 per cent at $US1,657.54 an ounce by 3:15 PM (2015 GMT), having earlier touched its lowest since Jan. 11 at $US1,655.39 an ounce.
The metal was 1.5 per cent lower this week, its worst weekly performance since the week of Dec. 23.
Gold could rise toward $US1,680 late next week after a test of support at $US1,640-1,650 due to weak technical momentum, said
Carlos Sanchez, director of commodities and asset management at CPM Group.
Gold priced in euros fell further, touching an eight-month low at 1,230.03 euros an ounce, as the single unit rallied on news banks will pay more cash than expected back to the European Central Bank in a sign that the banking system was stabilising.
Gold also came under pressure after data showed sales of new US single-family homes rose last year to the highest since 2009 despite a weak December.
US COMEX gold futures for February delivery settled down $US13.30 at $US1,656.60 an ounce.
Trading volume was 10 per cent above its 250-day average, preliminary Reuters data showed, partially boosted by February-April contract rollover ahead of February's first-notice day on Jan. 31.
Silver, which tends to be more volatile than gold, dropped 1.5 per cent to $US31.14 an ounce.
Physical demand improving
Bullion buying from China and India, the world's two largest gold consumers, has dwindled after a brisk start in the first two weeks of January, dealers said.
The price slump of the past few days, however, has triggered some physical buying interest, they said.
Bullion investors now await next week's Fed Open Market Committee (FOMC) statement on Wednesday and nonfarm payrolls on Friday for more clues on US monetary policy and the state of the world's largest economy.
Among platinum group metals, platinum was up 0.7 per cent at $US1,690.12 for a nearly 1.5 per cent weekly gain, extending its winning streak to a fourth week, its longest in a year. Spot palladium rose 1.9 per cent to $US737.81 an ounce.