Gold fell back towards five-year lows on Wednesday as investors continued to pull away from the precious metal, with a slide through key chart levels earlier this week setting prices up for further losses. The price slump comes after a spree of panic selling by investors.
A looming rise in US interest rates, the first in nearly a decade, has dented gold's investment appeal, encouraging more sellers in the market after Monday's 3% rout, its biggest one-day drop since September 2013.
Holdings in top gold-backed exchange-traded fund (ETF) SPDR Gold Trust fell for a fourth day on Tuesday, declining another 4.8 tonnes to hit their lowest since 2008. Its reserves have nearly halved from their 2012 peak.
Spot gold was down 0.5% at $1,095.69 an ounce at 0940 GMT, while US gold futures for August delivery were down $8.70 an ounce at $1,094.80.
On Monday, gold slid to its lowest since March 2009 at $1,088.05 an ounce. It failed to benefit from a softer tone to the dollar and stock markets on Wednesday, which usually would be expected to give some respite to the metal.
"We expect further losses in gold," Commerzbank analyst Daniel Briesemann said. "Gold prices are falling against the weaker dollar, declining equity markets -- those are clearly bad signs. Everything speaks against rising gold prices.
"ETF investors are getting rid of their holdings, and it seems speculators are also continuing to sell. It's a perfect storm for gold," he said. "Expectations about the developments of US interest rates are clearly an underlying trend."
Monday's selloff came on the back of huge volumes traded on the Shanghai Gold Exchange after investors dumped more than $500 million of bullion in New York in four seconds during early Asian trading hours.
That sparked a slide through key chart levels, triggering stop-loss orders that added to momentum. From a technical perspective, gold remains under pressure.
"Our next price target is seen at $1,044, the 2010 low, followed by $1,006, the late 2009 high," technical analysts at ScotiaMocatta said in a note. "Lower lows and lower highs keep this bearish price move in motion. Only a close back above $1,133 will stabilize the metal."
Physical demand has been sluggish despite this week's steep price drop. India is not rushing to pick up slack Chinese demand as would-be buyers wait for further price drops, with a wedding season lull and poor rains curbing appetite.
Spot platinum was down 0.9 percent at $968.95 an ounce, while palladium was down 1.1% at $618.90, both trading near multi-year lows. Silver was down 0.3% at $14.77 an ounce.